FranceAccounting and Audit
1. Scope of VAT
Pursuant to the rulings of the Court of Justice of the European Communities with respect to the scope of the VAT, the authorities have defined the concept of "direct connection".
Drawing the consequences of this definition, the authorities have repealed the 1983 instruction relating to the liability to taxation of commercial waivers of receivables. Henceforth, only subsidies and grants between companies which constitute consideration for customized services, or the price supplement for a taxable service, will be subject to VAT. Likewise, indemnities are exempt from VAT, if they correspond solely to the reparation of a loss, but are subject to VAT if they constitute compensation for a service or delivery of goods, or a price supplement (and in particular, according to the authorities, if they constitute indemnification for "common commercial damage").
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