Although it was designed to reduce the tax burden on businesses and encourage their growth, the mini value-added tax (VAT) regime – also called the “mini real regime” or “régime mini réel” in French – remains fairly unknown. This system combines the benefits of the normal and simplified tax systems, allowing companies to file monthly VAT returns while following relatively simple accounting practices. As such, the mini VAT regime offers significant value-added tax benefits for businesses. Below we’ll provide a more detailed explanation of this tax system, including its advantages and disadvantages.

What’s in this article?

• What is the mini VAT regime?
  
• Who can use the mini VAT regime?
  
• What are the advantages of the mini VAT regime?
  
• What are the disadvantages of the mini VAT regime?
  
• How do I adopt the mini VAT regime?
  
• How do I declare VAT under the mini VAT regime?
  

What is the mini VAT regime?

In order to declare VAT, every company must choose a tax regime that is appropriate for its business activities. This decision can be challenging for some businesses. The normal VAT regime allows for monthly VAT refunds, but it requires detailed accounting and regular administrative procedures. The simplified VAT regime, on the other hand, reduces administrative tasks but limits VAT refund claims to an annual cadence.

The mini VAT system is a hybrid of these two systems. It allows companies to file monthly VAT returns – as is done with the normal tax regime – while otherwise using the simplified tax regime.

Who can use the mini VAT regime?

Qualifying for the mini VAT regime is simple: any business, regardless of size or industry, can take advantage of this scheme. Whether you own a small business, a limited liability company (SARL), a single-shareholder simplified joint-stock company (SASU), or you’re a reseller, you can use the mini VAT regime. That said, it is not recommended for the self-employed.

The mini VAT regime is most suitable for medium-sized companies. It is especially fitting for those with annual turnovers between certain legal thresholds:

• €188,700 to €840,000: For retail and accommodation businesses
  
• €77,700 to €254,000: For service providers
  

What are the advantages of the mini VAT regime?

The mini VAT regime offers more flexibility than the normal tax system, without requiring the system’s same level of detailed accounting. Similar to the simplified tax system, companies only need to keep a balance sheet, a profit and loss account, and the required annexes. The mini VAT regime also goes a step further than the simplified tax system by easing certain accounting and reporting obligations.

Businesses that opt for the mini VAT regime can declare their VAT either monthly or quarterly, depending on their business activities, which can greatly simplify their declarations when compared to the normal tax system.

For small businesses looking to simplify their VAT management, the mini VAT regime is an ideal option. It allows for the quick recovery of VAT credits due to the regime’s monthly VAT-filing cadence. It also offers a more flexible accounting framework than the normal regime, while being just as effective as the simplified regime.

This can be helpful for businesses with sales that fluctuate significantly depending on the season. For example, a company in the hotel sector could receive a VAT refund faster during its peak reservation period, helping to improve its cash flow.

What are the disadvantages of the mini VAT regime?

Overall, VAT filing is flexible with the mini VAT regime. However, the regime offers less flexibility for businesses with fluctuating revenues when compared to the simplified system.

There is also a risk of errors with the mini VAT regime due to the more frequent filing of VAT returns. Errors can lead to penalties and administrative burdens.

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How do I adopt the mini VAT regime?

Like any other tax regime, the mini VAT regime is applied when a business is established. It is also possible to choose this regime during the company’s operation.

When registering a company, you can choose the mini VAT regime through the business formalities portal. To use the mini VAT regime after your company has been registered, you must send a formal request by registered letter to your departmental or regional directorate of public finances.

How do I declare VAT under the mini VAT regime?

Declaring VAT under the mini VAT regime is similar to declaring VAT under the normal regime. If a company chooses the mini regime, it must submit its monthly VAT return using form no. 3310-CA3-SD.