Don't run away! VAT, and more broadly the management of taxes in a restaurant, is never fun. But all restaurant owners have to deal with it at some point if they want to be in compliance with the law. To better understand the different VAT rates that apply in the restaurant business, here is an article (easy to understand!) with concrete examples and cases, to help you understand the tax rules governing the restaurant business.
VAT, or value added tax, is a tax applied to the sale of goods and services in France. In the restaurant industry, the applicable VAT rates vary depending on the type of consumption and the products served. Fortunately, innovative digital solutions exist to facilitate accounting and avoid errors.
What is VAT?
VAT, or Value Added Tax, is a consumption tax that exists in many countries, including France.
The way VAT works is relatively simple: at each stage of the production and distribution of a good or service, a company charges a certain amount of VAT to its customer, in addition to the selling price. The company then recovers the VAT it has paid to its suppliers on the goods and services it has purchased to produce its own product or service.
VAT is therefore an indirect tax that is paid by consumers, but collected and remitted by businesses. In France, the standard VAT rate is 20%, but there are also reduced rates (5.5% for certain food products, for example).
In France, VAT is an important source of revenue to finance a large part of public spending and to maintain essential public services, infrastructure and social protection.
The 3 VAT rates in restaurants
The sale of food and beverages in restaurants, whether on the premises or for takeaway, is subject to different VAT rates. There are 3 VAT rates for products sold in restaurants:
- 20%: only on alcoholic beverages, regardless of the type of consumption, immediate or deferred.
- 10% on all products sold for immediate consumption.
- 5.5% on products packaged in containers allowing their conservation, for a consumption which can be deferred.
In short, to know the VAT rate applicable in your restaurant, you have to determine if the food product or the non-alcoholic beverage is sold for immediate consumption or if it can be kept. Zoom on the 3 VAT rates applicable in restaurants.
1. The 20% VAT rate in restaurants
The standard rate of 20% applies to all alcoholic beverages. This 20% VAT rate applies regardless of the type of catering, takeaway or on site, and regardless of the type of container, hermetically sealed or for immediate consumption.
2. The 10% VAT rate in restaurants
The intermediate rate of 10% applies to :
- Dishes consumed on site and the sale of prepared food products for immediate consumption.
- Non-alcoholic beverages served in containers that do not allow for their preservation, and therefore for immediate consumption. These are non-alcoholic beverages served in cups, disposable glasses, etc.
Example #1:
A menu of the day consumed in a traditional restaurant is charged at the VAT rate of 10%.
Example #2:
Kebabs, burgers, sandwiches, pizzas, fries, salads, falafels, etc. sold for take-out are charged at the VAT rate of 10%.
Example #3:
Ice creams sold individually for immediate consumption, in pots, sticks, cones, etc. are charged at the 10% VAT rate.
3. The 5.5% VAT rate for restaurants
The 5.5% VAT rate applies to a product (food or drink) packaged in a container that allows its conservation, therefore for a consumption that can be deferred. The container must be airtight, with a best-before date.
Example #1:
A can of soda (Coca Cola, Pepsi, Orangina...) sold for consumption on the premises or to take away is sold with the 5.5% rate. In fact, this non-alcoholic beverage may be kept for later consumption, even if the customer chooses to open it immediately after purchase.
Example #2:
Yoghurts, packets of chips and single fruits sold in take-away restaurants are charged at the reduced rate of 5.5%. Indeed, these food products can be kept for a deferred consumption.
Example #3:
A dish sold to take away from a caterer who does not have a restaurant on the premises is charged at the reduced VAT rate of 5.5%. The caterer must ensure that the dish is put in an airtight container with a best-before date.
How to calculate the VAT in the restaurant business?
The calculator on the site entreprendre.service-public.fr allows you to quickly calculate the price including or excluding VAT according to the applicable VAT rate.
Calculation of the standard VAT rate of 20%.
Price before tax ÷ 100 x 20
Calculation of the intermediate VAT rate of 10%.
Price before tax ÷ 100 x 10
Calculation of the low VAT rate of 5.5%.
Price before tax ÷ 100 x 5.5
Calculation of the pre-tax rate from a price including all taxes
To obtain a price before tax (HT) from a price including all taxes (TTC), we apply the following calculation formula:
Price including VAT ÷ (1 + VAT rate) = Price excluding VAT
Example:
VAT in fast food restaurants: reduced VAT rates applicable according to the mode of consumption
In the fast food industry, the VAT rate applied to food and beverages depends on whether they are consumed immediately or later.
VAT in the catering industry
The 10% rate is applied to food and beverages intended for immediate consumption. That is to say that it is not possible to preserve them. This is the case in fast food, food trucks, sandwich shops, pies, bakeries...
VAT in the takeaway sector
The 5.5% rate is applicable to food or beverages that can be preserved for later consumption, provided that they are sold in hermetically sealed packages or sealed to allow for their preservation.
You must make sure to indicate the best before date on the package.
Please note: in fast food restaurants, the sale of alcoholic beverages is subject to the 20% VAT rate, regardless of the mode of consumption, on the spot or to take away, immediate or deferred. For example, a beer sold in a bottle is invoiced with a VAT rate of 20%.
Recap: the different VAT rates applicable to the restaurant industry
How to manage the VAT of your restaurant?
In the fast food or traditional restaurant business, it is very common to sell several categories of products at the same time. On the invoice, each product must be invoiced with the correct VAT rate.
Example: if you sell a burger + fries menu to take away + a can of soda, the invoicing must apply the 10% VAT rate for the burger + fries menu and the 5.5% VAT rate for the can of soda.
Another example: if you sell a dish consumed on the spot accompanied by a glass of wine, the invoicing must apply the VAT of 10% for the dish and the VAT of 20% for the alcoholic drink.
To avoid fraud or errors, French law is very strict on the application of VAT and restaurant owners are now required to use a management software or a certified cash register system.
The NF525 certified cash register
To facilitate the management of your restaurant, the Innovorder cash register is designed according to the eligibility criteria of NF525 certification. This touch-sensitive cash register, developed for fast-food restaurants and collective catering, allows you to indicate the right VAT rate automatically for each category of food and/or drink, but also according to the mode of consumption (on the spot, take-away, delivery).
Thanks to a complete, customizable and intuitive cash register software, the Innovorder cash register saves you time on a daily basis, whether it is for order management or accounting management. Manage all your orders in the same place, cash in quickly regardless of the method of payment and easily manage your accounting, with no risk of error. The applicable VAT rates for each product are automatically entered on the invoice.
👉 To go further: How to choose your NF525 cash register?
