VAT for local authorities: an unexpected financing lever
In a context of extreme pressure on public finances—delays in passing the Finance Act, difficulties in assessing the extent of local authorities’ contribution to reducing the national debt, investment freezes, rising operating costs, etc.—local authorities and intermunicipal bodies need to master their tax position and identify avenues for savings.
VAT for local authorities then becomes a strategic lever for identifying secure funding opportunities.
What if the specificities of your status were no longer merely a disadvantage, but became part of your funding strategy?
Althéa’s positioning
At Althéa, we provide you with unique, multi-sector technical expertise, underpinned
Turning complexity into opportunity.
At Althéa, we provide you with unique, multi-sector technical expertise, underpinned by rigorous legal and case-law monitoring. This responsiveness enables us to turn changes in tax doctrine into opportunities for immediate gains in support of your projects.
The objective? Identify untapped savings opportunities to create the financial flexibility essential to funding your public service missions.
Our savings levers cover the following topics:
- Identification of activities outside the scope of VAT
- Identification of activities within the scope of VAT by operation of law
- Analysis of crossing the VAT exemption threshold
- Application of the correct VAT rates
- Verification of the VAT collected tax base
- Calculation of VAT deduction rights
- Review of deductible VAT
- Specific tax mechanisms for investment projects
We help you turn the specificities of your status into a financial opportunity.
Methodology
Our objective: to turn your tax position into a performance lever. At Althéa, we believe in a relationship of trust and tailored engagements adapted to your constraints and the specificities of your status. We therefore rigorously deploy the following methodology:
Steps:
- Develop an understanding of your ecosystem and your organizational specificities
- Identify: public service missions, activities subject to VAT by option, activities subject to VAT by operation of law, and crossing the VAT exemption threshold
- Secure internal practices: tax matters leave no room for approximation
- Determine the activities for which VAT liability would represent a financial opportunity
- Support your teams: our mission does not stop at the assessment. We ensure the sustainability of your gains through medium-term support
GDPR
With the growing importance of data security, we also ensure the protection of your information in accordance with the EU General Data Protection Regulation (GDPR).
Challenges
Tailored and Secure Support
We support local authorities and intermunicipal bodies in identifying savings. Our studies are rigorous and secure: our approach is transparent, and during our assignment we may need to liaise with advisors to local decision-makers, the SIE, and local treasuries.
Identifying Savings Opportunities
Our approach aims to enable you to identify management methods that generate savings. We neutralize “windfall effects” in order to secure and maximize savings over time.
Choose Althéa as your partner to optimize your tax position!
Would you like to learn more or initiate a tax burden optimization project?
Business case
Local Authorities
€21,000+ recovered per year through VAT optimization on expenses
Client profile:
- Sector: Local authority
- Type: Public Intermunicipal Cooperation Establishment (EPCI)
- Context: Management of an industrial and commercial public service (SPIC) or an administrative public service (SPA) operating partly in the competitive sector
Before our intervention:
The local authority did not recover VAT on its operating expenses, treating the tax as a definitive cost.
Our intervention:
Exercising the right to deduct enabled this intermunicipal body to turn a “passive” management of VAT into resources.
Results:
- Observed annual gain: between €17,000 and €25,000
- Average annual gain: + €21,000 / year
- Budget impact: Direct reduction in the net cost of the service
FAQ
What are the VAT exemption thresholds?
The VAT exemption threshold is 85,000 for supplies of goods (increased threshold of €93,500) and 37,500 for services (increased threshold of €41,250).
Does opting for VAT end my entitlement to the FCTVA?
The Compensation Fund for Value Added Tax (FCTVA) is a financial mechanism through which the State reimburses local authorities for part of the VAT they have paid on their investment expenditure. This mechanism is not called into question by making an activity subject to VAT for the years concerned when the right to deduct is below 20%.
How do I calculate my VAT deduction rights?
When you are a taxable person and partially liable, you must calculate the “right to deduct”. This right is calculated using the deduction coefficient.
This coefficient is itself made up of: the liability coefficient (share of transactions that fall within the scope of VAT), the taxation coefficient (share of transactions within the scope of VAT that are taxed), and the admission coefficient (a statutory coefficient. It is 0 or 1 depending on the activity carried out).
