The French outermost regions and Community VAT legislation
The French outermost regions are not part of Union territory for the purposes of VAT (Article 6 of the VAT Directive).
The harmonised rules on VAT do not apply to the French outermost regions and the application of turnover taxes is a matter for the national or local authorities subject to respect for the general principles of the Treaty on the Functioning of the European Union (TFEU) and, notably, the absence of discrimination in the taxation of products.
The French outermost regions (other than French Guiana and Mayotte) apply a local VAT system closely resembling the Union system but with certain adaptations (reduced rates).
The dock dues tax (often referred to by its French name Octroi de mer) is several centuries old and was originally levied on all products arriving in the French outermost regions by sea.
In principle, the TFEU does not allow differences in taxation between local products and products imported from mainland France or the other Member States. However, the specific nature of the outermost regions is laid down in Article 349TFEU. This permits Member States to take specific measures, particularly in the tax field, to take account of the particular characteristics and constraints of these regions.
Local manufacturers have to contend with a number of constraints, caused especially by their remoteness, which increases the cost prices of their products, making them uncompetitive with products from elsewhere (especially mainland France and the other EU Member States). This has justified the implementation of a specific measure, that through tax exemptions or reductions for local products, serves to:
- encourage productive industrial activity,
- safeguard their competitiveness with outside products, and
- thus increase the proportion of the French outermost regions ' GDP accounted for by industrial activity.
Council Decision (EU) 2021/991 of 7 June 2021 authorises the French authorities to apply total exemptions or reductions of the local dock dues tax in respect of a limited list of locally manufactured products. These are specified in the annex to that decision. These tax exemptions or reductions may not result in tax differentials of more than 20 or 30 percentage points depending on the products. The authorisation is valid until 31 December 2027.
This decision therefore permits the application, subject to the authorised limits, of tax differentials between local products and products from outside the French outermost regions.
This decision introduced the following improvements: the introduction of more transparency in the criteria for the identification of eligible products, the revision of the maximum permitted tax differentials, raising the turnover threshold of dock dues to EUR 550 000 and the revision of monitoring arrangements.
The external study launched in view of the renewal of the regime had found that the dock dues regime is extremely important for the French outermost regions in terms of their economic development, competitiveness and local employment. There is a significant risk that discontinuing the regimes risks destabilising the future development of the outermost regions.
- Council Decision (EU) 2021/991 of 7 June 2021 concerning the dock dues scheme in the French outermost regions and amending Decision No 940/2014/EU.
- Proposal concerning the dock dues scheme in the French outermost regions
- Annexes to the proposal
- Commission Staff working document accompanying the proposal