Planning for Continuous Transaction Controls in France from 2023

Starting in 2023, French VAT rules will require businesses to issue invoices electronically for domestic transactions with taxable persons and to obtain ‘clearance’ on most invoices before their issue. Other transactions, such as cross-border and B2C, will be reported to the tax authority in the “normal” way.

This will be a major undertaking for affected companies and although the changes are more than a year away, planning should start now. But what does planning mean in the context of a continuous transaction control (CTC) rollout? What have businesses on the cusp of such a transformation learnt when faced with the same challenge in countries such as Italy, India, Mexico and Spain? And how can businesses leverage those best practices for future CTC rollouts?

We share the points businesses should consider when planning for any CTC rollout, which can be used as a checklist for the France 2023 mandate to help you prepare.

Understand the new changes, and be aware of what’s ahead

• Is your organisation aware of, and do the relevant functional teams understand, the material changes proposed by the government?
• Do your teams understand what specifically is changing and do they have a reliable source of information to use as guidance?
• In a situation as dynamic as a CTC rollout, do your teams have the means to monitor new developments and analyse future changes?
• Is there a process in place in your organisation for implementing new changes once they’ve been introduced in law?

Understand how your business and operations are affected

• Which of your business transactions are in scope? When do they need to be compliant?
• How are your intercompany invoices processed today? It’s not uncommon for businesses to overlook compliance requirements for their intercompany invoice flows, but in a clearance system these invoices are almost always in scope.
• How will invoices be sent to the French tax authority under the new system? Can you manage this internally or is a third party involved?
• What information in addition to the invoice information must be sent?
• Where an invoice is not required today e.g. B2C sales, what information must be sent?
• How should these invoices be archived? Are there any specific legal or technical requirements for such storage?

Design or evaluate potential solutions

• Is the CTC reform best solved through an internally developed solution?
  • If yes, talk to IT as soon as possible so they can start planning and allocate both the necessary time and budget for the project.
  • If no, who are the service providers that could help?
• If external providers are used, how will the data go from your source systems to them and ultimately to the tax authority?
• Which of your source systems contain the required data? Is it one or multiple?
• Does the external provider have a ‘ready to go’ extractor for your ERP system/source system? Or, if your organisation relies on an API first strategy, which source systems will you use to send the data on to your provider or the tax authority?

Execute the solution

• How much notice does your IT department need for such a project? Resources from IT will be required, regardless of whether it will be an external or internal project.
• How much will development and implementation cost? Budget will need to be secured regardless of how you plan on implementing your solution of choice, internal or external.
• When does the cost need to be submitted for budget approval?
• When do you need to kick off the project? Once the planning is completed and the time required is known (including testing and training) you can work backwards to achieve a start date. This date should be confirmed with IT as soon as possible.

Once you’ve answered the questions above, you’ll be in a good position to both plan the roadmap to ensure compliant processes in time for the entry into force, as well as to estimate the cost and secure the needed funding for the project.