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TVA (VAT) on French Property Renovations & Extensions

While purchasing a property in France it should be noted that materials and labor charges for the purpose of renovations or minor extensions are taxable at 5.5%. The following conditions should be fulfilled for getting vat return:-

♦  The construction of the house must be older for 2 years. If the tenure of the house does not cross 2 years, you
    have to wait sometimes until it crosses its two years lifespan in order to receive the deduction in tax rate
    from19.6% to 5.5%.
♦  If major renovations are required for your property, the work should be break up into smaller renovations over time
    to get the benefit for reduction in tax rate. Individual jobs executed within 2 years of time span is considered as a
    single item. Major items must be staged to take place more than 2 years distant to keep away from the 'major
    renovation' threshold.
♦  The work should be handed over to a registered trade’s person who will provide a written estimate (acknowledged
    as ‘devis’ in French) along with a TVA registration number for the entire renovation work. By providing this written
    document initially it will prove that the entire work is taxable at 5.5%.

The above 3 conditions are very much important for fulfilling the application of reduced rate to 5.5%. As for instance, you yourself purchase the materials instead of giving it to a registered tradesman and then you have to bear of 19.6%. Certainly, you can still pick up and reimburse for the materials yourself (for instance, if you don't want a workman to leave the job just to get some more materials) but make sure that it is purchased under the tradesman's account so that you can benefit from the lower tax rate.

Certain additions to renovation work like a swimming pool or a tennis court are treated as 'luxury items' and are purposely excluded from the reduced rate. If you are not aware about this, you should make sure that the trades people engaged with the work make a written estimate stating the reduced rate (as described above) or verify with your local tax office.

After the completion of the work the tradesperson should submit a document to you certifying that the work is completed at the reduced rate of 5.5%. All such documents must be preserved safely until the end of the fifth year following completion of the work as French tax authority may legally demand such document for the refund purpose.

TVA (VAT) on French Property Sales & Purchases

If you buy a new build property (i.e. under 5 years old) or a property which undertook a complete renovation to make the property habitable then the sale of the property is taxable at 19.6%. As a result, before making an offer on a property or signing any contract, you must pay these taxes or make sure that they are not relevant (either by having a notaire confirm it, or having a clause in the contract where the seller agrees to accept any such costs should they be applicable). In order to get exemption to bear TVA taxes you should wait for purchasing a property until it completes its 5 year threshold.

If you are selling a property which will cause to undergo TVA at 19.6%, be conscious that informed purchasers will feature this cost into the price conciliations. Accordingly, if you get a property which is close to the 5-year threshold, the sale should be delayed until this tax is no longer applicable, so that you can secure a better price.

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