There are several changes to the rate of VAT in France next year, including an increase in VAT on building works.

There are four different rates of VAT (la taxe sur la valeur ajoutée - TVA) in operation in France, in addition to which certain activities are zero rated.

Principal Rate

The principal rate of VAT is currently 19.6%, which increases to 20% next year.

This rate applies to the vast majority of sales and services.

Since July 2013, it also applies to most home help domestic services (services à la personne) previously charged at the rate of 7%. This increase occurred at the insistence of the European Commission.

Intermediate Rate

This rate of 7% was introduced in January 2012, and has applied to certain sales and services that were previously charged at the rate of 5.5%.

With effect from 1st January 2014 the intermediate rate increases to 10%.

The main activities affected by this rate are restaurant meals, repair, maintenance and improvement works to buildings (but see energy conservation below), travel tickets and wood fuel.

In an important last minute concession agreed by the government, the rate of 7% will be maintained for building works (repairs, maintenance and improvements) estimated in 2013, on which at least a 30% deposit has been paid, and which are completed, invoiced and paid by 30th March 2014.

Reduced Rate 5.5%

This reduced rate concerns food products, non-alcoholic drinks, gas and electricity charges, provision of heat produced from renewable energy, equipment and services for the disabled, books (in any medium), and tickets to the cinema, museums and live shows.

The rate also applies to building works of energy conservation, reduced next year from the current intermediate rate of 7%. The rate will also apply to associated works carried out with works of energy conservation.

In the draft Finance Bill for 2014 it was proposed to reduce this rate to 5%, but this existing rate will now be maintained.

Reduced Rate 2.1%

This very particular rate is reserved for medical prescriptions, the television licence, and certain other media activities.

Zero Rated

Finally, certain other activities are zero rated, notably teaching, medical and paramedical activities, exports within the EEA, waste disposal recovery, marine fishing,

The rate also applies to the letting of property (both furnished and unfurnished), although VAT must be charged where at least three of the following services are provided to the tenant - breakfast, daily cleaning, reception service, linen service.