Certified invoicing software for your accounting

As a sole trader (micro-entrepreneur), it’s in your best interest to use accounting software. It ensures you comply with the rules toward your customers and the tax authorities, and saves you considerable time that you can put into growing your business. Your software doesn’t have to be checked by a certification authority. However, it is important that its publisher has it certified individually to comply with the VAT anti-fraud law — which is the case, for example, with Bizyness, recognized as certified invoicing software.

Bizyness is the ideal partner for your accounting, letting you focus on what matters most: growing your sales.

Sole trader status and VAT

The VAT exemption

When the sole trader (auto-entrepreneur) status was created, it was not subject to VAT declaration or VAT invoicing. Since then, the rules have changed, along with the thresholds.

As long as you stay under the caps, you don’t charge VAT, because you benefit from the “VAT exemption scheme” (franchise en base de TVA). In return, you don’t deduct VAT on your purchases either.

To stay compliant, all your invoices must carry the mention: VAT not applicable, art. 293 B of the French General Tax Code (CGI).

When the exemption no longer applies or the threshold is exceeded

You become liable for VAT under two conditions: if you opt for an actual VAT taxation scheme, which allows you to deduct VAT on your purchases; or if you exceed the exemption threshold.

If you are a merchant:

• your revenue cap is €176,200;
• the VAT exemption threshold is €85,800;
• the increased VAT threshold is €94,300.

If you carry out a craft trade or a liberal profession:

• your revenue cap is €72,600;
• the VAT exemption threshold is €34,400;
• the increased VAT threshold is €36,500.

Threshold and increased threshold

You keep your VAT exemption for one year when your revenue falls between the VAT exemption threshold and the increased threshold.

However, if your revenue falls within the same range again the following year, from January 1 of the third year you must declare and charge VAT.

Exceeding the increased VAT threshold during the year

If you exceed the increased VAT threshold during a calendar year, you immediately lose your right to the exemption. This loss is retroactive, which means you must redo your invoices from the start of the month in which you exceeded the threshold and send corrected documents to your customers.

Once you no longer benefit from the VAT exemption, you must notify the relevant corporate tax department (service des impôts des entreprises). You will then need to declare and pay VAT through your professional account. This is why it’s important to be familiar with the VAT anti-fraud law.

Invoicing software specifically designed for sole traders automatically manages the transition out of the exemption, sparing you any accounting errors.

What is the VAT anti-fraud law?

The VAT anti-fraud law was introduced by the 2016 Finance Act.

Article 88 of law 2015-1785 of December 29, 2015 requires every business subject to VAT: “when it records customer payments using accounting or management software or a cash register system, to use software or a system meeting conditions of inalterability, security, retention and archiving of data for the purposes of tax authority audits, certified by a certificate issued by an accredited body under the conditions set out in Article L. 115-28 of the Consumer Code, or by an individual attestation from the publisher, in line with a model set by the authorities”.

As of January 1, 2018, every business subject to VAT must be able to provide a compliance certificate for its accounting management software. Failure to do so carries a fine.

The tax authority’s back-and-forth in defining the law’s scope

Lawmakers went back and forth on which businesses were covered by the VAT anti-fraud law. In the original law, both cash register software and accounting software were included. Then, in June 2017, the authorities reversed course, seeking to narrow its scope. Considering that cash register software was the main vector for VAT fraud, they decided to exclude accounting and invoicing software.

A further U-turn came from lawmakers at the end of November 2017, when they ultimately decided to revert to the original regulation, canceling the June 2017 provisions and reinstating invoicing and accounting software. The VAT anti-fraud law in this form became effective on January 1, 2018.

What is the goal of the VAT anti-fraud law?

VAT is the French state’s main source of tax revenue, accounting for nearly half of its income across all taxes combined. VAT fraud is estimated by Bercy (the Ministry of the Economy and Finance) to exceed €20 billion per year. It is of course impossible to pin down an exact figure, since by definition these are concealed amounts, but the shortfall is enormous.

The state has therefore put safeguards in place to monitor all money transfers, taking into account the ever-growing volume of e-commerce sales. By requiring certified invoicing software, Bercy hopes to curb any leakage, whether intentional or not.

Moreover, with this certified software requirement, the state can better target its monitoring efforts, distinguishing between general tax audits and audits focused specifically on VAT. As a result, your software can be audited at any time, without prior notice from a tax authority agent and outside the framework of a standard tax audit.

Who is affected by the VAT anti-fraud law?

Naturally, a sole trader is only affected if they have exceeded the VAT exemption threshold. In addition, the law does not require professionals to use accounting software at all, meaning merchants who don’t use one are not affected by the measure.

However, this measure applies to all VAT-liable professionals who use software, whether they run physical shops or online stores. Indeed, the law was originally designed primarily for merchants’ cash register software, but the growth of e-commerce prompted the state to extend its scope to the business and accounting management software that handles online transactions.

Since the certification requirement for cash register software applies to any VAT-liable business in France that records customer payments through a cash register software or system, branches and subsidiaries of foreign companies are also subject to the obligation to hold secure, certified software and systems.

Certification applies equally to software sold on physical media and software accessed online. Lastly, if you have devices with interconnected cash register software, each one must be certified separately.

Exceptions to the requirement to hold certified invoicing software

Holding certified invoicing software applies to all merchants, and more broadly to all VAT-liable professionals who record customer payments through a cash register system, a till, or software, regardless of their industry, for physical shops or online stores.

However, exceptions apply to professionals who:

• benefit from the VAT exemption scheme (in particular, sole traders);
• benefit from the flat-rate agricultural VAT reimbursement scheme;
• carry out exclusively VAT-exempt transactions;
• carry out only business-to-business transactions;
• have all their payments processed through the direct intermediation of a credit institution.

Specifics for online sellers

Online sellers:

• who are not required to invoice because their customers are not VAT-liable (i.e., private individual customers) fall within the scope of the law;
• who are required to invoice because their customers are VAT-liable (i.e., business customers) do not fall within the scope of the measure;
• who serve both VAT-liable customers (business customers) and non-liable customers (private individuals) are subject to the VAT anti-fraud law.

The case of open-source software

If you use open-source software (or free software), an audit will identify a lack of certification, since the software cannot be certified.

Indeed, free software means that every user can freely use it and modify it. The creator(s) of the system make their creation available, allowing anyone to make whatever adaptations they choose. This software is designed to be customized by any user to fit their own needs.

This means the software may no longer meet the conditions required to obtain certification — namely, compliance with the conditions of inalterability, security, retention, and archiving.

Furthermore, since it is up to the publisher to provide you with the certification, they cannot supply this document, as they have no access to the modified version you use for your accounting.

What are the criteria for certifying invoicing software?

Software certification is granted provided the following four conditions are met:

1. condition of inalterability: the software allows all payment-related data to be recorded without any possibility of alteration;

2. condition of security: the software automatically secures the original data, any changes made, and supporting documents;

3. condition of retention: the software records and closes off data over a defined period;

4. condition of archiving: the software provides for an archiving period during which data is frozen, dated, and protected by a technical mechanism guaranteeing the integrity of the information.

For multi-function software (accounting/management/cash register), only the cash register/payment collection functions need to be certified — not the entire software.

How must a publisher register their certified invoicing software?

The software publisher is the party that holds the software’s source code and controls changes to the system’s settings. The certificate for certified invoicing software can be provided on paper or in digital form, on an electronic medium.

The publisher has two options for certifying their software:

1. they can approach an accredited body that issues a certificate;

2. they can draft an individual attestation themselves, following the model set by the tax authorities.

The document attesting that the invoicing software is certified must be personalized when the publisher provides it to their customer — that is, you, the sole trader. The certification must include the following mandatory information:

• the name and contact details of your business;
• the name and contact details of the publisher;
• the precise name and reference of the software;
• the software’s acquisition date;
• an explicit statement that the software meets the conditions of inalterability, security, retention, and archiving.

Keep in mind that it is up to you to request the certificate proving your invoicing software is certified from your provider, as the publisher is not required to issue it automatically. If you have any questions on this topic, feel free to ask them directly.

What are the risks if you don’t comply with the VAT anti-fraud law?

The fine for failing to comply with the VAT anti-fraud law is €7,500. It is multiplied if you work with several pieces of software.

You also have 60 days to come into compliance. Beyond that, you owe a penalty of the same amount, which can be renewed every 60 days for as long as you remain non-compliant.

If you provide a false attestation or a fraudulent certificate, the fine becomes a criminal matter. It can reach €45,000, along with 3 years of imprisonment.

As you can see, when choosing your future invoicing software, you need to make sure it is properly certified.