Liability to pay VAT
The EU VAT systems is essentially based on fractionised payments, VAT being collected at each stage of the production and distribution chain after offsetting the input VAT paid on purchases against output VAT received on sales. According to the main rule laid down by Article 193 of VAT Directive, the person liable for the payment of this VAT is the person supplying goods or services. The liable person is the person who is held to pay VAT to the Treasury.
General reverse charge for foreign businessess
However, there are situations where VAT liability is reversed. The supplier does not charge any VAT and it is the customer's responsibility to pay the tax due to the State. In the jargon, this is called reverse charge.
This reverse charge mechanism has been introduced in France for the supply of goods and services carried out on the national territory by foreign taxable persons (who do not have a permanent establishment in France) to a taxable customer who has a French VAT number.
In other words, when a taxable person not established in France sends an invoice for a transaction located in France to another taxable person identified for French VAT purposes, no VAT should be charged. However, the invoice must be marked "reverse charge".
It is important to note that a foreign taxable person will not be able to obtain a French VAT number if he only carries out transactions for which the reverse charge is applicable*. If he bears French VAT on his purchases, he will then have to request its recovery through an international refund request, either via the electronic portal of his own Member State's administration if he is established in the EU (procedure provided for by Directive 2008/9/EC), or directly with the French administration if he is established in a third country (procedure called the 13th Directive).