Starting a business or launching a freelance activity in France comes with a multitude of strategic tax choices, among which the franchise en base de TVA (VAT exemption scheme) plays a central role. This system, designed to simplify the daily management of small businesses, allows you to invoice your clients tax-free, thereby offering a competitive advantage and an exemption from repetitive tax filings. However, the growth of your business can quickly lead you to cross the limits set by law, turning this haven of simplicity into a real administrative and financial headache if the transition is not anticipated. This comprehensive guide, written by our experts, details the substantive rules, applicable thresholds, practical steps, and pitfalls to avoid to perfectly master the VAT exemption scheme.
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The franchise en base de TVA is a favorable tax regime that exempts businesses from declaring and paying Taxe sur la Valeur Ajoutée (TVA / Value Added Tax) on the services or sales they perform. In return for this exemption, the business cannot deduct the VAT it pays on its own professional purchases (equipment, raw materials, operating expenses).
On a legal level, this regime is governed by *Article 293 B of the Code général des impôts (CGI / French General Tax Code). To formalize this status with their clients, the professionals concerned must mandatory include the following legal mention on each of their invoices: « TVA non applicable, art. 293 B du CGI »* (VAT not applicable, art. 293 B of the CGI).
This mechanism applies by right to micro-entreprises (sole traders under the micro-enterprise regime/auto-entrepreneurs), but also to classic sole proprietorships (entreprises individuelles or EI) and companies (EURL, SARL, SASU, SAS) whose turnover does not exceed certain thresholds. It constitutes a major attractiveness lever, especially for private individual clients who cannot recover VAT and thus benefit from more competitive rates.
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To benefit from the franchise en base de TVA, the turnover excluding tax (chiffre d'affaires hors taxes or CA HT) of the previous calendar year must not exceed strict limits. These thresholds vary according to the nature of the activity carried out and are re-evaluated periodically.
There are two thresholds for each category of activity: the base threshold (or reference threshold) and the increased threshold (or tolerance limit threshold).
This category concerns commercial trade activities, the sale of food to take away or consume on-site, and the provision of accommodation (hotels, bed and breakfasts, rural gites).
This category encompasses commercial or artisanal service provisions, as well as regulated or unregulated professions libérales (independent professional activities).
The legislator has provided special provisions for lawyers, authors, and performing artists (governed by Article 293 B, III of the CGI).
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Maintaining or losing the exemption regime depends on how your turnover positions itself in relation to these two thresholds (base and increased) over one or several consecutive years.
If your turnover exceeds the base threshold but remains below the increased threshold, the tax administration grants you a tolerance period. You retain the benefit of the VAT exemption for the current year, as well as for the following year, under one strict condition: that the turnover of the previous year did not itself already exceed the base threshold.
In clear terms, you cannot be positioned between the base threshold and the increased threshold two years in a row without becoming subject to VAT.
As soon as your turnover crosses the increased threshold (for example, €44,500 for services or €110,000 for sales), the VAT exemption immediately ceases to apply. You become liable for VAT from the 1st day of the month of exceeding.
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To fully understand these sometimes abstract mechanisms, let us analyze two practical situations.
Thomas is a digital strategy consultant under the micro-entreprise status. His reference thresholds are €39,100 (base) and €44,500 (increased).
Marie sells her creations online. Her reference thresholds are €101,000 (base) and €110,000 (increased).
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If you cross the tolerance thresholds, you must react quickly to bring yourself into compliance with the tax administration. Here is the process to follow:
As soon as you notice the exceeding (or from January 1st if the loss of the exemption follows two consecutive years of exceeding the base threshold), you must inform your SIE (Corporate Tax Office) via the secure messaging system of your professional space on the `impots.gouv.fr` website. Request the allocation of an intra-community VAT number. This number is essential for invoicing and declaring VAT.
From the transition date (the 1st day of the month of exceeding or January 1st, depending on the case):
1. Remove the mention « TVA non applicable, art. 293 B du CGI » from your invoices.
2. Apply the VAT rate corresponding to your activity (generally 20%, or the reduced rates of 10%, 5.5%, or 2.1% depending on the products or services).
3. Clearly display on your invoices the amount excluding tax (HT), the applied VAT rate, the amount of VAT collected, and the total amount including tax (TTC).
You must opt for a VAT declaration regime:
The loss of the exemption comes with a major advantage: you can now deduct the VAT paid on your professional purchases. Carefully keep all your purchase invoices containing VAT. Furthermore, under certain conditions, you can recover VAT on capital goods (fixed assets) that you already held in stock at the time of the transition to VAT.
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The transition to VAT is a delicate phase. Here are the most frequent errors committed by entrepreneurs:
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Yes, absolutely. This is known as the option for voluntary payment of VAT. It proves particularly interesting if you launch an activity requiring significant initial investments (purchase of machinery, vehicles, large stocks) or if your clients are exclusively professionals (B2B) who recover the VAT themselves. The option takes effect on the first day of the month in which it is formulated and is valid for a minimum period of two years.
If your turnover drops back below the base thresholds (€39,100 or €101,000), you can benefit from the VAT exemption again starting from January 1st of the following year, unless you have deliberately opted for the real VAT regime.
The calculation is made based on the number of days of the business's existence in the year.
Formula: Base threshold x (Number of days of activity / 365).
For example, for a service business created on September 1st (i.e., 122 days of activity until December 31st), the pro-rated base threshold will be: €39,100 x (122 / 365) = €13,070. If the business generates more than €13,070 in turnover over these 4 months, it will not be exempt from VAT the following year.
No. Although the VAT exemption is often associated with the micro-entreprise, it applies to all legal forms of businesses (SASU, EURL, SARL, SAS, etc.) as long as their turnover respects the legal thresholds. Conversely, a micro-entrepreneur can perfectly be subject to VAT while retaining the ultra-simplified micro-entreprise regime for their social security contributions and income tax.
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Legal information for guidance only, not personalised legal advice. For your specific situation, ask your question free of charge on AvocatAI — answers based on French law, in your language.