BDO Indirect Tax News

France has undertaken a major modernization of its VAT framework. Ordinance No. 2025-1247 of 17 December 2025—published in the Official Journal of 20 December 2025—formally transfers all VAT-related legislative provisions from the Tax Code (CGI) into a new consolidated Code of Taxation on Goods and Services (CIBS). This reform aims to bring together all taxes applicable to goods and services, along with their regimes and procedures, into a single more coherent legislative structure. The recodification also updates key definitions, reorganizes exemptions and incorporates recent EU VAT directives, particularly those relating to the digital sector.
  
The updated version of the VAT legislation will become effective on 1 September 2026.

The CIBS has been developed in phases, reflecting the breadth of taxes it will ultimately encompass:

• 1 January 2022: Legislative elements for general excise taxes (energy products, alcohol and tobacco), the mobility sector (land, air and maritime transport) and the industry sector;
• 1 January 2024: Incorporation of the communications, culture and digital sectors;
• 1 January 2025: Introduction of regulatory provisions;
• 1 January 2026: Integration of ancillary electricity-related taxes;
• 1 September 2026: Entry into force of the VAT provisions; and
• Final stage (date pending): Inclusion of environmental, agricultural and gambling taxes.

Reorganisation and Rewriting of VAT Provisions

The recodification represents a fundamental overhaul of France’s VAT legislation. While many provisions have been streamlined or shortened, the overall number of provisions has increased. The result is a more readable format, although taxpayers will need to navigate a broader set of provisions to gain a full understanding of the VAT system.

A report to the French President in 2025 highlighted the proliferation of 100 reduced or derogatory rates and 85 exemptions, which undermined the coherence of the VAT rules. To address this, the CBIS organizes VAT provisions by sector of activity and consolidates them into a dedicated VAT “book” in the CIBS.

Key changes include:

• Derogation rates and exemptions grouped by economic and sectoral categories;
• Structuring the 18 special VAT regimes as independent sections, rather than exceptions to the general regime; and
• Codification of established case-law principles, such as the concept of a “direct and immediate link” test for the right to deduct input VAT and the definition of a permanent establishment for VAT purposes;

The Ordinance also directly transposes recent EU directives into French law, including elements of the ViDA package and measures encouraging the use of the import one-stop-shop or IOSS, in that they relate to technical measures for which EU member states have no room to manoeuvre.

Updated Terminology and Clarified Concepts

The CBIS introduces updated terminology to improve consistency and modernize the language of the VAT law:

• "Intra-community operations" are now "intra-European operations";
• "Distinct sectors of activity" are now "autonomous sectors";
• "Suspensive regimes" are now "exemption regimes"; and
• "Travel agencies" are "travel operators."

It also formalizes some important concepts, including

• Two categories of VAT exemption:
  • Functional exemptions giving rise to the right to deduct input VAT (comparable to territoriality rules); and
  • Derogatory exemptions, which do not give rise to the right to deduct input VAT (reducing the tax burden for reasons of general interest);
• The "zero rate";
• Definitions of "opaque" and "transparent” intermediation;
• The concept of "contract work"; and
• The distinction between "off-market," "remunerative" and "closely related” transactions.

Entry Into Force Measures and Transition Rules

The transition to the CIBS regime is intended to be gradual and practical:

• As noted above, the new VAT code becomes effective on 1 September 2026.
• Provisions of the CGI will be repealed only as their corresponding regulatory provisions enter into force.
• Administrative comments and tax rulings remain valid even if references or terminology have not yet been updated. A public consultation will allow practitioners to flag errors and propose refinements.
• Tables indicate where provisions were found in the CGI and where they are in the CIBS.
• Taxpayers may continue to refer to the former articles of the CGI until 31 December 2027.

Importantly, the new e-invoicing rules, which are also scheduled to come into force on 1 September 2026, are not affected by the recodification. For now, e-invoicing provisions remain in the CGI and will be incorporated into the CIBS at a later stage.

David Hirsch
Guillaume Deiber
Valentine Alarcon
BDO in France