France: Tax authorities issue revised guidelines regarding VAT “option to tax” for financial services

The guidelines are intended to integrate recent legislative measures that relax an “option to tax.”

The guidelines are intended to integrate recent legislative measures.

The French tax authorities in late June 2022 published revised guidelines regarding the recent “reshaping” of a voluntary value added tax (VAT) election for financial services.

The guidelines are intended to integrate recent legislative measures that relax an “option to tax”—often referred to as the “free choice option.”


The Finance Law for 2022 modified article 260B of the French tax law concerning an election for taxpayers that exercise the option to tax. Read TaxNewsFlash

Under these measures, the VAT option for financial services is now applicable to operations (or transactions) that the taxpayer determines as being within the scope of the provisions. Basically, the provision allows for the option to be applied “à la carte” and is no longer an “all-in” option. Therefore, the taxpayer is not bound to include in the “VAT net” each and every financial operation or transaction within the scope of the option, but can select operations by categories, by client profile, or even on an operation-by-operation basis.

The revised guidelines essentially cover the following areas:

  • The “free choice” character of the option
  • The formal requirements and the effective date or entry-into-force provision
  • The treatment of cross-border operations or transactions

The following discussion provides an overview of some of the main changes and trends reflected in the revised guidelines. 

Free choice character of the option

The French tax authorities confirmed that the taxpayer is free to apply the option to the operations at the taxpayer’s full discretion. This is in line with the legal provision (L'assujetti qui a exercé l'option l'applique aux seules opérations qu'il détermine). This treatment, however, assumes that the taxpayer has filed, with the French tax authorities, a letter making a formal election to exercise the general VAT option prior to the subject operations or transactions.

Thus, a taxpayer that has already filed the formal election letter is able to choose the operations to be placed under VAT. The guidelines from the French tax authorities reflect that such a choice can be made (according to an unofficial translation): “…in relation to its own motivations, to apply the option not only operation by operation, but also according to categories of operations or, according to a global approach, to all banking and financial operations in the scope of the option.” 

Formal requirements—effective date or entry in force

For a taxpayer that intends to elect to use the option, the first action is to make a formal election to its tax center. The entry into force of the option will be the first day of the month following the receipt of the election letter.

For those taxpayers that have already previously exercised the option, the operations or transactions realized as from 1 January 2022 can be submitted (or not) to VAT as from this date. The date of operations is to be determined based on the date of the fait générateur, which in practice corresponds to the execution of the service (generally in line with the invoicing date).

For taxpayers that did not yet make the election, the French tax authorities have not provided a tolerance to correct operations since 1 January 2022, although their definitive comments were not known until the end of June 2022. There is no specific formal requirement to evidence the choice to apply (or not) the option to a specific operation or transaction.

When the taxpayer is based in France, the guidelines indicate that an invoice of the service supplier must show the amount of VAT and compliance with all mandatory invoicing requirements. 

Treatment of cross-border operations—the right to recover

In a nutshell, the French tax authorities essentially retained their former guidelines that authorized a French service provider to benefit from a right to recover for business-to-business (B2B) cross-border operations or transactions when the option is made and applied. This is based on the fact that international operations would need to open a right to recover in the same way as they would in a domestic context. Since these operations are not subject to French VAT due to the B2B place-of-supply rules (thus, the invoice cannot “show” the evidence of the option), the French tax authorities provided the following practical guidance (an unofficial translation): “…or the taxpayer exercised the option and the taxpayer is presumed to apply it specially to these (cross-border operations) and these open a right to recover.”

These comments, thus, secure the right to recover for the French service provider. They also involve a further benefit with respect to the wages-tax ratio.

There are other comments pertaining to the application of the option to complex operations that involve a main supply and ancillary services; these are not discussed in detail in this report. In sum, the guidelines are allowing taxpayers to apply the option to ancillary services as well as to the main supply, according to conditions provided by law (article 257ter) when the nexus between the main supply and ancillary services is identified.  

KPMG observation

The revised guidelines demonstrate a clear effort by the French tax authorities to keep the initial spirit of an option “à la carte”—that is, to enhance the attractiveness of the French financial marketplace and to align the use of the option for financial services on other VAT options available. Thus, this provides a new state-of-play for a number of taxpayers including asset managers, investment services providers, and bankers.

Considerations are useful for both financial operators that have exercised the option in the past and for others that are still considering the risks, and rewards, in making an election.

For more information, contact a tax professional with the KPMG member firm (KPMG Avocats) in France:

Philippe Breton |

Arnaud Moraine |

Laurent Chetcuti |


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