VAT for SMEs: rates, declarations and deductions in 2026

Updated March 2026 - VAT (Value Added Tax) is the most complex indirect tax for SMEs. Between applicable rates, reporting regimes and deductibility rules, errors are frequent ”” and costly. This complete guide gives you all the keys to mastering your VAT in 2026.

France applies four distinct VAT rates. Identifying them correctly is essential to bill your customers correctly and avoid any tax adjustments.

Normal rate: 20%

This is the rate applicable by default to the vast majority of goods and services.

Examples: intellectual services, clothing, electronics, consulting fees.

Intermediate rate: 10%

Applied to specific sectors:

• ▸Catering: meals consumed on site or to take away
• ▸Renovation work of the accommodation (under conditions)
• ▸Passenger transport
• ▸Hospitality and furnished tourist accommodation

Reduced rate: 5.5%

Reserved for essential products:

• ▸Unprepared food products
• ▸Books (paper and digital)
• ▸Energy subscriptions (gas, electricity)
• ▸Equipment and services for people with disabilities

Super-reduced rate: 2.1%

Applicable only to medicines reimbursable by Social Security and to periodicals.

Hayot Expertise Advice: A VAT rate error on your invoices can lead to a tax adjustment. If in doubt about the rate applicable to your activity, consult your accountant before invoicing.

The basic franchise exempts you from collecting and declaring VAT, provided that you do not exceed certain annual turnover thresholds.

Excess thresholds based on 2026

Please note: If you exceed the threshold during the year, you become liable for VAT from the 1st day of the month of excess.

Practical consequences

• ▸Advantage: No VAT to pay, simplified invoicing.
• ▸Disadvantage: You cannot recover VAT on your purchases. If you have significant investments, voluntary registration may be more cost-effective.

To find out more about the taxation of your structure, consult our article on the 2026 finance law and its key measures for SMEs.

Real simplified regime (RSI)

For companies whose annual turnover excluding tax is between:

• ▸€36,800 and €254,000 for services
• ▸€91,900 and €840,000 for merchandise sales

Statements:

• ▸Two half-yearly installments (in July and December)
• ▸An annual declaration (form CA12) in May

Actual normal regime (RN)

Mandatory beyond the RSI thresholds, or optional.

Statements:

• ▸Monthly declarations (form CA3)
• ▸Or quarterly if the annual VAT is less than €4,000

Expert's opinion: The normal real regime, although more administratively restrictive, offers better visibility of your VAT cash flow. With a real-time accounting tool, management becomes fluid.

Poor VAT management can block your cash flow or trigger a tax audit. Our firm supports you in:

• ▸Choose the VAT regime best suited to your activity
• ▸Configure your accounting tools (Pennylane, etc.)
• ▸Optimize your declarations and maximize your deductions

👉 Discover our accounting expertise support

The VAT you pay on your professional purchases is in principle deductible from the VAT you collect. However, certain rules apply.

What is deductible

• ▸Purchases of goods intended for resale
• ▸General operating costs (professional rent, hardware, software)
• ▸Professional investments (utility vehicles, machines)

What is not (or partially)

• ▸Passenger vehicles: non-deductible VAT
• ▸Restaurant expenses: partially deductible depending on the supporting documents
• ▸Mixed expenses (personal and professional use): pro rata to be applied

VAT credit

If your deductible VAT exceeds your collected VAT, you generate a VAT credit. You can :

• ▸Report it to the next declaration
• ▸Request reimbursement (subject to deadline and amount)

To learn more about your tax strategies, consult our article on tax optimization via holding company.

VAT is a technical tax which requires rigor and method. Identifying the right rate, choosing the right declaration system and optimizing your deductions are three essential levers for your cash flow and your tax compliance.

📞 Do you have questions about your VAT? Our firm analyzes your situation and helps you secure your declarations. Make an appointment with an expert

(Reference sources for this file: Directorate General of Public Finances (DGFiP), Bofip, Légifrance)