VAT (value-added tax, TVA in French) is an indirect tax on consumption, ultimately borne by the final consumer but collected on behalf of the State by businesses at each stage of the economic chain. Introduced in France in 1954, it is today the country's largest source of tax revenue.
The mechanism is based on deduction: a business remits to the public treasury the difference between the output VAT charged on its sales and the deductible (input) VAT paid on its purchases. Only the value added at each link is therefore actually taxed, which avoids the compounding effects of a traditional cascade turnover tax. Returns are filed on a schedule (monthly, quarterly or annual) that depends on the business's tax regime.
In France, several rates coexist: the standard rate of 20% (the general case), the intermediate rate of 10% (restaurants, transport, renovation work, etc.), the reduced rate of 5.5% (essential foodstuffs, books, energy, etc.) and the special rate of 2.1% (reimbursable medicines, the press). Specific rates apply in Corsica and the French overseas departments. The applicable rate depends on the nature of the good or service, which makes multi-rate invoicing common.
Compliant invoicing requires stating the VAT rate and amount per line, data that is then found in electronic invoice formats such as Factur-X and in the FEC. eyeot's Invoicing module handles these different rates.