IMPORTING NATURAL GAS AND ELECTRICITY INTO FRANCE: CUSTOMS, EXCISE AND VAT FORMALITIES
Trading of natural gas and electricity
Identification of the players in the sector
We are surely here talking about two of the most sought-after energy sources in these troubled economic and geopolitical times... The need to source energy beyond European borders has increased due to supply difficulties - whether anticipated or actual and real. But how do you complete the customs formalities for importing natural gas and electricity into France? French customs have confirmed that the grid operator could not do it for the traders, and each one of them must fulfil the required customs import formalities.
On top of the above reasons, the increase of volume of imported natural gas and electricity into France is also mechanical:
in value due to the increase in the price of these commodities;
in volume, (due in particular to the United Kingdom's exit from the European Union - Indeed, in the aftermath of the Brexit, natural gas and electricity supplies have become imports).
During 2020 (due to Covid namely, where despite of an increase in domestic consumption, the industrial production activities were less energy consuming), as an illustration, imports in France increased by 10% in volume for electricity in 2021 compared to the year 2019.
Imports are mainly carried out by buyers/resellers of electricity and natural gas (energy traders) who do not import these commodities for their own consumption.
Import points in France for electricity and natural gas
These commodities are intangible goods, so how do you determine their point of import?
With regard to electricity
The electricity network is made up with interconnectors within which the various "grid operators", i.e. the national network managers, are linked. The French electricity transmission network is linked to the networks of six other European countries: the United Kingdom, Belgium, Germany, Italy, Spain and Switzerland. If the electricity comes from the interconnections with the British and Swiss grids, an import declaration is required for the operator.
For natural gas
A Gas Exchange Point (“PEG”) is a virtual hub where all the players in the gas supply chain meet. In practical terms, it enables wholesale gas purchases and sales to be contracted. It therefore serves as a link between gas producers and extractors, suppliers, distributors and transporters. The gas PEG is therefore no more and no less than a natural gas market. This entity enables the daily organisation of financial transactions in gas. In concrete terms, it is used to measure the quantity of gas injected and withdrawn from the network each day.
If the PEGs are virtual marketplaces, how and where should the gas import formalities, which are still due, be carried out?
How to import natural gas and/or electricity into France?
Customs import formalities
When importing, the buyer/seller of natural gas and/or electricity must accomplish customs import formalities. The import of these intangible goods is a specific operation that should be entrusted to a registered customs representative familiar with these products, their players and all the inherent specificities.
If the trader is established outside the European Union, he must appoint an indirect customs representative, or failing that, a Third Party Importer or an EU established Importer of Record.
Once the customs declarant has been identified, it will be necessary to ensure that it is able to issue an appropriate customs declaration. While the tariff position (natural gas 27111100 and electricity 27160000) and the customs origin are easily determined, the customs value also requires the expertise of the customs declarant. Basically, one can question the appropriate value to be declared.
Is it the market price at the time of import or should the trader use the value of the many sales invoices issued in a given month?
Treatment of excise duties (energy taxes) on the import of gas and/or electricity
VAT, customs duties if applicable, and excise duties (or energy taxes, respectively TICGN and TICFE) will be settled on this same import declaration. In order to know whether the TICGN and/or TICFE will be due on import, it is necessary to go back to their chargeable event.
According to article 312-13 of the Code of Taxation of Goods and Services (CIBS) for coal, natural gas and electricity, the chargeable event for excise duty is constituted by
1° The supply in the tax territory of the product by one person to another person who consumes it.
2° Consumption of the product in the territory of taxation by a person who has produced or imported it into the territory of taxation or into the territory of another Member State of the European Union.
As soon as these events are not characterised, the TICGN / TICFE excise duties are not due and your customs representative must know how to ensure that they are not applied.
And what about VAT on gas and electricity imports?
France has generalised the reverse charge of import VAT since 1 January 2022. Any trader established in or outside the EU who imports into France should register for French VAT so that his VAT number is active on the day of importation. This will enable them to self-assess the VAT on the import. Otherwise, there is no reverse charge and therefore no possibility of recovering this VAT.
Fundamentally, however, the import VAT must still be due! If it is not, there is no need to register for VAT FR for these purposes.
Article 258 III of the CGI stipulates that the place of supply of natural gas and electricity is located in France only
a. when the said energy is consumed in France ;
b. in other cases, when the purchaser has in France the seat of his economic activity or a permanent establishment for which the goods are delivered or, failing that, his domicile or his habitual residence.
Thus, if the trader who imports these energies is not established in France, and if he is not an end user of the imported energy, your customs declarant must know how to ensure that import VAT is not applied on your customs declaration. Furthermore, a FR VAT registration for a foreign trader should not be mandatory in this respect.