Set aside, at every payment received, the share of VAT it contains: 16.67 % of the gross amount for a sale at 20 %, 9.09 % for a sale at 10 %, 5.21 % for a sale at 5.5 %. If you prefer a single rule, provision 20 % of every gross payment: you cover VAT at the standard rate with a small margin, and the surplus stays yours. The VAT you recover on your purchases is deducted when you file the return, never before. For an immediate estimate on your own figures, the VAT simulator on our home page does the calculation in a few seconds.
Why the question comes up at every month end
When a customer pays 1,200 € including VAT, your account shows 1,200 €. But 200 € are not yours: that is the VAT collected on behalf of the State, which you will hand over at the deadline. On a single account, nothing distinguishes those 200 € from the rest. You pay suppliers, fuel, a deposit, and three months later the return lands on an account that no longer holds the sum.
The problem is not the profitability of the business. It is the confusion, on one account, between money that is yours and money that is only passing through. The answer has two parts: knowing how much to set aside, and doing it at the right moment, that is when the payment arrives and not when the invoice is issued.
The exact calculation by rate
VAT is calculated on the net amount. To find it from a gross amount, divide by 1 plus the rate. The table gives the share of the gross amount to isolate for each rate in force in mainland France.
| VAT rate | Share of the gross amount to set aside | On 1,000 € gross received |
|---|---|---|
| 20 % (standard rate) | 16.67 % | 166.67 € |
| 10 % (intermediate rate: eat-in catering, eligible renovation work) | 9.09 % | 90.91 € |
| 5.5 % (reduced rate: certain food products, energy-efficiency work) | 5.21 % | 52.13 € |
| 2.1 % (special rate: press, certain medicines) | 2.06 % | 20.57 € |
If your whole activity is at the same rate, one line is enough. If you mix rates, calculate per invoice line, or keep the prudent rule of 20 % of the gross amount, which covers every case with a margin on the reduced rates.
The 3 accounts method
The method consists of splitting every payment received into three envelopes as soon as it arrives: the current account to run the business, a VAT provision, and a provision for charges to cover social contributions, tax and the unexpected. The simple version, described in our founding article on the 3 accounts method, puts 60 % in the current account, 20 % aside for VAT and 20 % for charges.
The precise version replaces the 20 % for VAT with the actual share calculated at the rate of each sale. It is fairer for a restaurant owner or a renovation tradesperson, most of whose sales are at 10 %. In both versions the principle is the same: the VAT provision is never spent, and the balance of the current account becomes a reliable figure again.
Three fictional examples, round numbers
The three situations below are invented for the demonstration. The amounts are rounded and correspond to no real business.
An electrician at the standard rate
He receives 6,000 € gross per month, all at 20 %. The collected VAT contained in those receipts is 1,000 € (6,000 divided by 1.2 gives 5,000 € net). His purchases of supplies for the month come to 1,800 € gross, that is 300 € of deductible VAT. What he will actually owe at the deadline is around 700 € per month, but the provision to build up is 1,000 €, because the deduction is calculated at filing time, with the purchase invoices in hand. If he applies the 20 % of gross rule, he sets 1,200 € aside: the 200 € surplus stays his.
A restaurant with two rates
It receives 12,000 € gross per month: 10,000 € of eat-in meals at 10 % and 2,000 € of alcoholic drinks at 20 %. The collected VAT is 909 € on the meals and 333 € on the drinks, that is 1,242 €. The 20 % of gross rule would have it provision 2,400 €, almost double: too much money tied up for a business with tight margins. For this one, the calculation by rate is a must. The particulars of this trade, takeaway included, are detailed on the e-invoicing for restaurants page.
A mason doing renovation with some subcontracting
He invoices 9,000 € gross of renovation work at 10 % to private customers, that is 818 € of collected VAT. He also carries out 4,000 € net of subcontracting for a general contractor: on that part, the principal applies the reverse charge, so there is nothing to set aside. His provision for the month is 818 €, not 20 % of 13,000 €. The reverse charge and the reduced-rate certificate are explained on the e-invoicing for construction page.
When the money actually leaves: by VAT regime
Setting money aside every month does not mean paying every month. The payment date depends on your VAT regime in France.
VAT exemption scheme (franchise en base). You charge no VAT, there is nothing to provision. Keep an eye on your thresholds, though: exceeding them switches you over, sometimes mid-year.
Simplified regime (réel simplifié). You pay two instalments, in July and December, calculated on the previous year's VAT (55 % then 40 %), and you settle the balance with the annual CA12 return. The trap is there: deadlines are rare and distant, so the monthly provision matters even more. In a first year of activity, with no history, the instalments are calculated on the actual VAT of the half-year.
Standard regime (réel normal). You file and pay every month on the CA3 form, or every quarter if your annual VAT stays low. The gap between receipt and payment is short, but the discipline is the same.
In every case, the provision is calculated on payments received, not on invoices issued. For a supply of services, VAT becomes due on receipt of payment: an invoice issued in June and paid in August is declared in August. Provisioning at invoicing would mean locking up money you have not yet received.
What automation changes
Done by hand, the method rarely lasts more than two months: you have to remember the transfer after every payment, week after week, and redo the calculation for every rate. That is why CashFacture applies it automatically: at every payment received, by transfer, by card or by NFC tag on site, the VAT share is calculated at the actual rate of each line of the invoice and isolated. The dashboard permanently shows the VAT collected, the deductible VAT on recorded purchases and the estimated amount of the next deadline.
That visibility matters more since the e-invoicing reform: with transmission through a Plateforme Agréée (the accredited platform), the tax administration will have more precise VAT data, sooner. Better to know your position every evening than to discover it at the deadline. The automatic split is included from the START plan at 9 € excluding VAT per month, with a 7-day trial, card required, nothing charged before the end of the trial.
Frequently asked questions
Should I set aside 20 % of my receipts for VAT?
It is a prudent rule that works if your sales are at the standard 20 % rate. The exact share of VAT in a gross amount at 20 % is 16.67 %. If you mostly sell at 10 % or 5.5 %, calculate by rate: 20 % of gross would needlessly tie up cash.
Should I subtract the VAT on my purchases from my monthly provision?
No. Provision the collected VAT in full and deduct the VAT on your purchases when you file the return, with the purchase invoices in hand. Deducting in advance on an invoice you have not yet received is the first cause of an insufficient provision.
I am on the simplified regime: why set aside every month if I only pay two instalments?
Precisely because the deadlines are distant. Between two instalments, six months of collected VAT pile up in the current account, and the annual balance on the CA12 can be high if the business has grown. The monthly provision turns those deadlines into non-events.
Do I need to open three bank accounts to apply the 3 accounts method?
No. The principle is to separate three envelopes. CashFacture applies the split automatically at every payment received and shows the VAT provision in real time, with no manual transfer and no change of bank.
Your VAT set aside at every payment
CashFacture calculates the VAT share at the actual rate of each line and isolates it as soon as you are paid. 7-day trial, card required, nothing charged before the end of the trial.
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