All you need to know about VAT in the restaurant sector
In the restaurant sector, the VAT (value-added tax) rate on food and drink sales has several specific features. To clarify, the following is a summary of the various VAT rates that are charged in a restaurant.
- Quels sont les taux de TVA en vigueur dans le secteur de la restauration ?
- VAT in the restaurant sector: VAT on beverage sales
- VAT in the restaurant sector: VAT on food sales
- Establishments concerned by VAT rates in the restaurant sector
- Calculating the correct VAT rate
- Collecting VAT in the restaurant sector
- Declaring VAT collected in a restaurant
- Recovering deductible VAT on restaurant expenses
Applicable VAT rates in the restaurant sector
The following VAT rates are applicable in the restaurant sector:
- A standard rate of 20 %
- An intermediate rate of 10 %
- A reduced rate of 5.5 %
The applicable VAT rate varies according to the type of product sold (beverages or foodstuffs) and according to the mode of consumption. A distinction is made between “immediate consumption” and “deferred consumption”.
If the product is sold in a container or packaging that allows it to be preserved, this is known as deferred consumption. If the opposite is true, this is known as immediate consumption (i.e., it can be consumed on the premises).
VAT in the restaurant sector: VAT on beverage sales
The following VAT rates apply to the sale of beverages in the restaurant sector:
- 20%: for sales of alcoholic beverages, irrespective of the mode of consumption
- 10%: for non-alcoholic beverages sold for immediate consumption, served in containers that do not allow them to be preserved (glasses, cups, etc.)
- 5.5%: for non-alcoholic beverages, sealed in containers that allow them to be preserved (bottles, cans, cartons, etc.) and consumed later.
VAT in the restaurant sector: VAT on food sales
The VAT on the sale of food items (starters, dishes, desserts, etc.) for immediate consumption is 10%.
Since 2014 (following the 2012 Amending Finance Act), a reduced VAT rate of 5.5% applies to the sale of food packaged in containers that allows it to be preserved for consumption at a later date. For example, the rate would be 10% for the sale of unpackaged ice cream served in a bowl and 5.5% for ice cream packaged in a container.
Remember to take these different VAT rates into account when drawing up your restaurant’s business plan and financial forecast!
Good to know:
For restaurants that offer takeaway or home delivery, cooked and delivered meals (pizzas, sushi, salads, sandwiches, etc.) are subject to the 10% VAT rate since these dishes are meant to be consumed rapidly. Sealed beverages, on the other hand, are subject to the following rates: 20% for alcoholic beverages and 5.5% for non-alcoholic beverages. Drinks sealed in cans or bottles, for example, may be consumed at a later date.
Establishments concerned by VAT rates in the restaurant sector
The rates detailed above apply to all establishments operating in the restaurant sector (fast-food restaurants, traditional restaurants, bar-restaurants, brasseries, cafeterias, franchised restaurants, etc.), as well as to street vendors such as food trucks, and food outlets in facilities such as railway stations, museums, service stations, shopping centres, theatres, sports complexes, hotels, trains or boats.
Calculating the correct VAT rate
It is not uncommon for the same bill to include several different VAT rates: for example, the sale of a pizza (10% rate) + a glass of wine (20% rate). In this case, care must be taken to apply the correct VAT rate to each item sold and to integrate such into the revenue collected. This is known as revenue breakdown.
It is important to break down revenues correctly. If the breakdown of VAT rates is not performed, then the highest VAT rate on the bill is applied (in the case illustrated, the applicable rate would be the standard VAT rate of 20% for the alcoholic beverage).
→ To simplify the calculation of VAT and ensure that the correct rates are charged for each item, you should use cash register software that automatically calculates the correct VAT rate. This is essential to properly comply with tax regulations.
Collecting VAT in the restaurant sector
Collecting VAT in the restaurant sector is very simple. Restaurants are classified as service providers, and must therefore collect VAT at the same time they collect revenues, i.e., when the customer pays the bill.
Declaring VAT collected in a restaurant
Restaurant owners (or more often, their accountant) must make a VAT declaration to the tax authorities. Generally, they will do so on a monthly basis, based on the data recorded by the cash register software.
Recovering deductible VAT on restaurant expenses
Restaurant owners must also deduct the VAT charged on restaurant expenses. In the restaurant business, most expenses are subject to VAT deduction (e.g. rental of the premises, renovation works, furniture & fixtures, kitchen equipment, beverages and raw materials, etc.).
To recover VAT correctly, it is essential to properly maintain your accounts and invoicing, and carefully manage your cash flow.
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