TLDR: Exceeding the VAT exemption threshold results in the immediate loss of the exemption scheme and the obligation to apply VAT to subsequent transactions. The effective date depends on when the threshold is exceeded: during the year or retrospectively. The rules vary depending on the type of activity and applicable tax regime.
Loss of the exemption scheme
Exceeding the VAT exemption threshold results in the immediate loss of the exemption scheme. You must apply VAT to all subsequent transactions starting from the date the threshold is exceeded. The exact date depends on when the threshold is exceeded.
Deferred application of VAT
If the threshold is exceeded during the year, the obligation to apply VAT begins on the first day of the month following the one in which the threshold was exceeded. For example, if the threshold is exceeded in March, VAT applies from April 1st.
If the threshold is exceeded retrospectively, the obligation to apply VAT begins on January 1st of the following year. For example, if the threshold is exceeded in 2024, VAT applies from January 1st, 2025.
Declarative obligations
If the VAT exemption threshold is exceeded, you must inform the Service des Impôts des Entreprises (SIE) within the month following the exceedance. This declaration is made by a simple letter on plain paper. This step is necessary to activate VAT e-filing.
Special cases for non-profit organizations
For non-profit organizations, exceeding the threshold for profitable revenue results in the loss of VAT exemption. If the exceedance is identified based on the previous year's data, the exemption ceases from January 1st of the current year. If the exceedance is identified during the year, the exemption ceases from the first day of the month following the exceedance.
Temporary suspension of threshold reductions
Until December 31, 2025, the reduction of VAT exemption thresholds is suspended. The previous thresholds continue to apply, and the rules for exceedance remain unchanged.
Penalties for non-compliance
Failure to comply with declarative obligations may result in penalties. For example, for farmers, the tax due is increased by 25% when turnover exceeds three times the exemption threshold.