As one of the biggest European countries, France has a rich history, culture, and architecture, making it a preferred property destination for foreign investors.
There are a variety of reasons to choose this beautiful place- including a divine range of culinary delights, breathtaking scenery and a more relaxed approach to work.
If you have decided to invest in a French property, whether as a primary residence or for vacation purposes, you should be aware of the tax implications so that you can plan ahead of time.
Besides all this, did you know that by renting out your new-build, furnished property, you can save 20% on the purchase price of your real estate?
The attractive VAT reimbursement is boosting the whole real estate sector, encouraging future owners to purchase a newly built house or apartment that they might live in, rent and profit from.
In this guide, you will find everything you need to know about claiming a property VAT refund in France.
How can I save 20% on the purchase price of my French property? Can I reclaim VAT on new-build residential property in France?
If you have decided to invest in a new buy-to-let, you should know that new-build real estates in France include 20% VAT (TVA)* in the purchase price. Old buildings are exempt from VAT (older than 5 years).
This property VAT rebate is very profitable because it saves you a lot of money.
You will be able to get it, only if you rent out your furnished real estate under the French leaseback scheme.
Initially, you will have to pay the full price and then apply for a refund from the French Tax Administration.
*VAT=TVA (Taxe sur la Valeur Ajoutée) is an expenditure tax imposed on consumers of services and goods in France.
How can I claim the VAT on my French real estate?
As a foreign investor, you should keep in mind that the VAT recovery should be done via an accredited financial/legal expert. They can coordinate the procedure for you and manage your accounts in the next years for the VAT deduction.
A professional French real estate tax advisor like PTI can help you get your money back. The property tax accountancy specialists will claim back the VAT on your investment when all required documentation is exchanged.
When can I claim the VAT on my French property investment?
If you are a non-French resident, the VAT reclaim process can start once a year. This is usually in January for the purchase made the previous year.
When will I receive the VAT back on my French property?
If you decide to use our professional assistance and we claim the VAT on payments made the previous year, you should generally get the French VAT by June. This will happen every year until you get back the entire amount of VAT paid.
What are the requirements to get my property VAT refunded in France? What is the 20 years rule?
- the property should not be your primary residence
- the French Tax Administration grants the VAT rebate only if you rent out your real estate for a period of 20 years (or more)
If you stop renting out your property after 5 years, you will have to pay back part of the refund that you have received
- your property must be furnished
- you must be renting it out on a short-term basis
(you cannot rent your property for the whole year or season for instance)
- you must be offering the tenants at least three of these four “para hotel” services:
– It must have reception (handover of the keys)
– linen and bed changing
– breakfast (it could be a breakfast delivery service)
What are the obligations of the management company that deals with my French property investment?
Your French real estate will be rented out via a management company that will maintain it on your behalf and provide different “para hotel” services.
In other words, the management company or the rental agency will handle everything and provide rental services to the tenants.
You will have to sign a contract for the French leaseback property scheme, where the rental fees that you will receive from the management company will be listed, as well as the property maintenance costs and your personal use options of the real estate.
If you want to have your property at your disposal wherever you want, you will have to make sure that the leaseback agreement is flexible, provided that you inform the management company when you want to use it in advance.
Owners of leaseback properties in France are not paying Taxe d’ Habitation and Cotisation Foncières des Entreprises (CFE) – these two local taxes are paid by the management company.
Learn more about taxes on your leaseback rental property in France.
What if I decide to sell my French property?
You are able to resell your real estate before the end of the 20-year term.
However, there are a few things to keep in mind:
- If you resell the real estate and the new owner wants to rent it out, there will be no VAT to repay because the VAT will continue to be rebated to the new buyer
- if you decide to sell your property after 10 years for instance and the new buyer does not want to continue the leaseback scheme, you will be required to repay half of the VAT that you received
Can a UK company get back French VAT?
If you own a UK company that is not registered in France for VAT, there is no way to claim back what has been charged. However, in certain situations, if this business is registered for VAT, you may be able to claim back VAT under a specific reimbursement programme set up by the 8th VAT directive.
Can I get VAT relief for the renovation of my French property?
If you are repairing or improving your French real estate a lower rate of VAT is applicable. The rate in this situation is 10%. For energy-saving building works, the rate is 5.5%.
Which properties are eligible?
The VAT relief for property renovations is available if this real estate is either your primary residence or a second home. If it is a construction of a new property or the real estate is under two years old, this deduction is not applicable.
Which improvements on my French property are considered eligible?
All new property developments should be eligible, as long as they do not increase the surface area by more than 10%. You should know that an increase in the height is not considered acceptable, neither are parking areas, balconies, verandas, etc.
Sometimes, the French tax authorities do not want to accept any extensions as eligible. This is because the regulations regarding reclaiming vat on property renovations are not precise. But an extension to the real estate that is no more than 9m2 is appropriate.
The work should be carried out by a French registered building professional, and they should provide you with a certificate that confirms that the work is in accordance with the rules.
You are not required to present this statement to the tax authority unless they specifically request it, but you must keep it for 5 years.
Should I file a French tax return?
Yes. Even if your real estate has not been rented out, you may be required to file a return or declaration. We have a range of plans to suit all types of properties – whether furnished or unfurnished etc.
Rental income from residential property in France is subject to tax, regardless of whether the owner is a French resident or not.
Who can help me claim my French VAT refund?
Yes, tax is complicated, but we’ve got you covered. You don’t have to worry anymore about filing your French tax return!
Property Tax International (PTI) provides real estate tax specialist services and we can help you claim VAT on your property purchase in France. We have 20+ years of experience preparing international tax returns on behalf of our customers.
PTI specialises in French property tax and has unrivalled knowledge of the local tax system. We can assist you with all property VAT recovery procedures.
Why choose us?
- We will answer all your questions. PTI has multi-lingual support via email and phone
- Our tax experts will handle the tricky tax documentation and communicate with the French tax authorities on your behalf
- Our service is online- easy, fast and reliable
- You will reduce your property taxes, save money and maximise your profit from your French rental property
NOTE: You will also need to file a French tax return on your rental income each year.
- Want to learn more? Follow our tax guide for holiday home owners in France, so you know how to lower your property taxes and pay your french property tax bill online.