Do French Companies Need to Charge VAT When Billing Chinese Clients? (Part 2)
Last week, we covered the basics of French VAT obligations when billing Chinese companies.
This week, we’re diving deep into the practical compliance requirements, common mistakes, and best practices that will keep your international business operations smooth and legally compliant.
Documentation and Compliance Requirements
Essential Records to Maintain
Proper documentation is your shield against VAT disputes. Here’s what you must keep:
- Client verification documents proving Chinese business registration
- Service delivery evidence (emails, project files, completion certificates)
- Payment records showing international transactions
- Invoice copies with proper VAT treatment notation
Reporting Obligations You Can’t Ignore
Even though you’re not charging VAT on these services, you may still need to:
- Report the transactions in your VAT returns (if VAT-registered)
- Include them in your annual tax declarations
- Maintain records accessible for French tax audits (5-year minimum retention)
Pro tip: Create a dedicated folder for each Chinese client with all compliance documents. Digital organization saves hours during audit season!
China’s VAT Perspective: What Your Clients Need to Know
Upcoming Changes in China
China’s VAT law becomes effective January 1, 2026, which may significantly affect how Chinese companies handle international service purchases.
Your Chinese clients should consult with their local tax advisors about:
- Chinese VAT on imported services
- Withholding tax obligations
- Proper documentation requirements for international transactions
The Client Communication Strategy
Be proactive: Inform your Chinese clients about their potential domestic VAT obligations. This positions you as a knowledgeable partner and prevents payment delays due to unexpected tax complications.
Common Mistakes That Cost French Companies Money
Mistake #1: Assuming All Services Are VAT-Exempt
The Problem: Not all services qualify for cross-border VAT exemption The Solution: Always verify the specific nature of your service against current regulations
Mistake #2: Inadequate Documentation
The Problem: Failing to maintain proper records leads to VAT disputes during audits The Solution: Implement a systematic documentation process from day one
Mistake #3: Incorrect Invoice Format
The Problem: Improper VAT treatment notation causes confusion and compliance issues The Solution: Use standardized invoice templates with clear exemption language
Mistake #4: Ignoring Service Location Rules
The Problem: Services performed physically in France may still be subject to French VAT The Solution: Clearly distinguish between remote services and on-site work
Your 5-Step Compliance Checklist
Step 1: Assess Your Service Type
Determine whether your service qualifies for cross-border B2B VAT exemption using the DGFiP guidelines.
Step 2: Verify Client Status
Confirm your Chinese client is a legitimate business entity with proper registration. Request and file copies of their business license.
Step 3: Implement Proper Invoicing
Use correct invoice formats with appropriate VAT exemption notations and legal references.
Step 4: Maintain Comprehensive Records
Keep detailed documentation for all China-related transactions, organized by client and year.
Step 5: Schedule Regular Reviews
Quarterly review of your VAT treatment with internal team or external advisor.
Related International Business Considerations
Currency and Payment Management
- Exchange rate implications: Consider hedging strategies for large contracts
- Payment processing: Factor in international transfer fees and timeframes
- Accounting procedures: Implement proper foreign exchange accounting
Double Taxation Treaties
France and China have a double taxation agreement that may affect:
- Income tax treatment of your Chinese revenue
- Withholding tax rates on certain service types
- Available tax credit opportunities
Transfer Pricing Considerations
For ongoing relationships or large transaction volumes, consider transfer pricing documentation requirements to ensure arm’s length pricing.
Future Changes to Watch (2025-2026)
French VAT Threshold Changes
France will reduce the VAT registration threshold for services from €37,500 to €25,000 starting January 2026, which may affect some businesses’ obligations.
Digital Services Evolution
Stay informed about:
- Changes in cross-border digital service taxation
- New reporting requirements for international transactions
- Updates to VAT exemption criteria for digital services
China’s VAT Implementation
Monitor China’s VAT law implementation (effective January 1, 2026) as it may impact your Chinese clients’ purchasing processes.
When Professional Advice Becomes Essential
Consider consulting with a tax advisor when:
- Your annual revenue from Chinese clients exceeds €100,000
- You’re providing multiple service types with different VAT treatments
- Your Chinese clients have specific documentation requirements
- You’re expanding into other non-EU markets
- Audit preparation is needed
For complex international tax matters, you can contact the French tax administration’s international division directly.
Key Success Factors:
- Standardized client onboarding process
- Automated invoice generation with proper VAT notations
- Quarterly compliance reviews
- Proactive client communication about tax obligations
Conclusion: Building Sustainable Franco-Chinese Business Relationships
Successfully managing French VAT obligations when serving Chinese clients isn’t just about compliance—it’s about building trust and professionalism that supports long-term international business relationships.
Your Action Plan: ✅ Audit your current Chinese client invoices for proper VAT treatment ✅ Implement the 5-step compliance checklist
✅ Create standardized documentation processes ✅ Schedule a compliance review before year-end ✅ Prepare for upcoming regulatory changes in 2026
References and Additional Resources
- French Tax Code Article 259 A – Legifrance.gouv.fr – Legal basis for VAT exemption
- European Commission VAT Portal – VIES FAQ – EU requirements
- France-China Tax Treaty – Direction Générale du Trésor – Treaty information
- French International Tax Division – Contact DGFiP – Professional support
Need comprehensive support for your international expansion? Our specialized international business services include VAT compliance, documentation management, and ongoing advisory support for French companies serving global markets.
💡 Did this series help clarify your VAT obligations? Share your success stories or remaining questions in the comments!
🔄 Share this with other French entrepreneurs expanding to China – compliance knowledge is power!
