VAT is an indirect tax. It is the tax whose return is the most important. VAT brought in around 157 billion euros in 2014, almost half of the state's tax revenue. In comparison, income tax accounts for just over a quarter.
VAT rates
Different VAT rates applicable on 1 st January 2014 are:
The standard rate called the normal rate is 20% (19.6% previously). It is levied on the majority of products and services;
The intermediate rate is 10% (compared to 7% previously). It relates in particular to catering, the sale of prepared food products, transport, etc.;
The reduced rate is 5.5% . It applies to products considered to be essential (food products, non-alcoholic drinks, school canteen and energy);
Finally, there is a super reduced rate of 2.1% on the press and drugs reimbursed by Social Security, certain shows, the television license;
Who collects and who pays VAT?
VAT is an indirect tax, which means that it is not collected directly by the state like income tax, housing tax or property tax.
VAT is in fact a tax which is added to the price of all the products which are subject to it, that is to say almost all. Only a few are exempt, such as the sale of fiscal or postage stamps.
This is the reason why two amounts always appear on invoices for products and services: the price excluding taxes (HT), which corresponds to the seller's remuneration, and the price including all taxes (TTC), which includes the amount of VAT.
It is therefore the seller of the product or service who collects VAT from his customers and who is then responsible for remitting it to the State.
To prevent the same product from being taxed several times during successive purchase and resale operations, such as between a wholesaler and a retailer, a system of deductions for VAT paid by companies is put in place. It thus allows companies to deduct from the sums to be returned to the State the amount of VAT they have paid on their purchases.
In the end, only the end consumer bears the VAT.
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