If you clicked on this article, it's probably because you are a little lost, either because you've just started out and don't know what to answer when asked, or because you're starting to earn a good living as a freelancer and you know you'll have to invoice VAT, but you don't know exactly when or how.

Many resources exist that will explain all of this in detail, but we're going to try to keep it SIMPLE.

🤓 First, what is VAT?

VAT, or Value Added Tax, is an indirect tax on consumption.
Indirect because it is collected from the customer by the "seller" (whether it's the baker - who sells stuff - or you - who sells services) who then pays it to the State.

#🤑 How does it work?

If you are subject to VAT, you will invoice your usual services adding a percentage of VAT (which will vary depending on your activity).
The amount without tax (excluding tax) + VAT = the amount with tax (including tax)
⚠️ This is not your money: you collect it BUT you will have to pay it back to the State. So it's better to set it aside so you don't get caught off guard when declaring.

Except that VAT, you don't just collect it, you also pay it, every time you purchase a good or a service through your company (accounting software, computer, client restaurant...).

So in the end, when it comes time to declare and pay VAT to the State, you're going to make a little exchange:
- You're going to take all the VAT you collected
- Subtract the VAT you paid with your purchases
- And there you go, that's the amount you pay

💸 And as an independent contractor?

If you sell services, regardless of your legal form (micro-business, SARL, SAS, EURL...):
- if you are in a micro-business: you benefit by default from "the VAT base exemption" (= you do not collect it, but you pay it like any other human being in this country when you purchase goods/services). Your invoices therefore bear the mention "VAT exemption, article 293B of the CGI".
- if you have a company: you can ask to be exempt from VAT base

BUT this stops if your turnover exceeds certain thresholds.

🚪 What, thresholds?

Micro-business

As you know, being in a micro-business means having to respect certain thresholds and ceilings #DIY
Regarding VAT, if as a service provider:
- you have a turnover between €34,400 and €36,500 for 2 years in a row: you are subject to VAT the following year
- you exceed a turnover of €36,500 during the year: there you are directly subject to VAT from the 1st day of the month in which you exceed (even on invoices already issued without VAT)

Artist-author

If you are an artist-author and
- your turnover for the previous year is greater than €44,500 and less than €54,700: you are subject to VAT the following year.
- you exceed a turnover of €54,700 during the year: there you are directly subject to VAT from the 1st day of the month in which you exceed (even on invoices already issued without VAT)

If you realize it too late

You must catch up on the VAT not invoiced on the invoices you have issued in the meantime.

Attention it's irreversible

The moment you are subject to VAT, you must request a VAT number, and your company/micro-business is subject to it FOREVER. No going back.

So basically, if you intend to make money as a freelancer, staying under the "VAT base franchise" is
1/ not very sustainable
2/ not very interesting, because you keep paying VAT on the things you buy, without being able to deduct it

👉 The actual VAT regime: it's good

As a micro-entrepreneur, you are therefore not subject to VAT by default, as long as you stay below the thresholds.
BUT you can opt for "the actual VAT regime"
Which allows you to collect VAT, but also to deduct VAT on the things you buy, which is beneficial.

#🔦 What VAT rate for me?

Depending on the nature of the freelance activity, the VAT rate varies:
- the standard rate is 20%
- except for artists-authors registered with the MdA, where it is
5.5% for the sale of an original work
10% for the transfer of copyright (right of representation, reproduction, adaptation, exploitation) and interpretation
20% for all other operations
(and there are plenty of details and exceptions --> get an accountant)

🧾 How to invoice VAT?

As a micro-entrepreneur subject to the actual VAT regime, you must include certain special mentions on your quotes and invoices (when you invoice via acracy, we take care of it for you):
- your VAT identification number
- that of the client if they are subject to VAT
- the unit price exclusive of VAT (your daily rate or your package)
- the applicable VAT rate
- the total amount excluding VAT
- the total amount including VAT

Well, there are still a thousand topics to cover, but that's already a good summary for now.

Updated on: 24/03/2023