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VAT tax changes from 2014

As of 1st January this year, there are a number of changes to VAT in France and they will apply to everyone at some point. The biggest impact may be felt at restaurants, where there'll be a three per cent increase in VAT for businesses. Overall, there are four different rates of VAT. So here's what you need to know…
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• Principal Rate
The principal rate of VAT has now jumped from 19.6 per cent to 20 per cent. This rate applies to most products and services, for example a pair of shoes or an envelope. Since July 2013, it also applies to most home domestic services, which were previously charged at the rate of seven per cent.

• Intermediate Rate
Set at seven per cent in 2012 (after a rise from 5.5 per cent), the intermediate rate is now increased to 10 per cent. It applies to restaurant meals, travel tickets and wood fuel. It also applies to the repair, maintenance and improvement works to buildings. However, works estimated in 2013, on which at least a 30 per cent deposit has been paid, and which are completed, invoiced and paid for by 30th March 2014, will still maintain the VAT rate of seven per cent.

• Reduced Rate 5.5 per cent
This reduced rate will stay the same and concerns food products, non-alcoholic drinks, gas and electricity charges, provision of heat produced from renewable energy, equipment and services for the disabled, books (in any medium), and tickets to the cinema, museums and live shows. Any energy efficient building works will also be included in this rate, reduced from seven per cent.

• Reduced Rate 2.1 per cent
This is applicable to medical prescriptions, the television licence, and certain other media activities and will be maintained.

• Zero Rated
Certain activities including teaching, medical and paramedical activities, exports within the European Economic Area, waste disposal recovery, and marine fishing do not attract VAT. This stays the same in 2014. It also applies to the letting of property (both furnished and unfurnished). Note, however, that VAT must be charged where certain services are provided, like breakfast and daily cleaning.