Last Updated on October 3, 2024 by Kristina Valcheva
Across the globe, many countries offer incentives to boost tourism and attract buyers, but have you ever heard of an opportunity that lets you purchase a brand-new property and then reclaim VAT back?
This is what France is offering. There’s a compelling incentive in place that allows you to claim 20% VAT back on new-build residential properties if you rent them out commercially.
This French VAT refund can translate into substantial savings, letting you recover 20% of the purchase price of your new French property.
Even better, this benefit is available to non-residents, making it an enticing option for international investors.
In this guide, you will find everything you need to know about claiming a property VAT refund in France.
Reclaiming VAT on property in France
What is TVA in France?
*VAT=TVA (Taxe sur la Valeur Ajoutée) is an expenditure tax imposed on consumers of services and goods in France.
In France, the regular VAT rate is set at 20%.
How can I claim VAT back on new build property in France?
You could claim 20% VAT back on your new build French property if you agree to rent it out commercially.
To qualify, you’ll need to meet certain requirements and sign a commercial lease.
You will be able to get back the VAT refund 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.
Unlike regular ownership, there are some rules.
What is considered new-build property in France?
Old Properties
- Definition: Buildings older than 5 years, including apartments and houses, which have been sold or transferred.
- VAT: Sales of these properties are exempt from VAT. VAT is only applied to the seller’s margin in resale transactions.
New Properties
- Definition: Buildings completed within the last 5 years or old buildings that have undergone major renovations.
- VAT: Sales are subject to 20% VAT. This applies regardless of the number of sales within the first 5 years after completion.
What are the requirements for the French leaseback scheme?
You must rent the property for at least 8 to 9 weeks in winter and at least 3 weeks in summer. Plus, you can’t stay in the property for more than 182 days a year.
- The property cannot be your main home.
- You must rent out the property for at least 20 years to qualify for the VAT rebate from the French Tax Association (FTA).
- The property needs to be fully furnished.
- It should be rented out for short-term stays.
You must offer at least three of these four hotel-like services:
- A reception area for key handover
- Linen and bed changing
- Cleaning of the property
- Breakfast service (delivery is okay)
Can I use the property for my own purposes?
Yes, but only up to a point. You need to report any personal use on your tax return, and using the property for a few weeks a year is usually okay.
If you want to use it more than that, talk to an advisor.
What if I stop renting my property?
The French Tax Administration offers a VAT rebate if you rent out the property for 20 years.
If you stop renting it after 10 years, for example, you might need to repay half of the VAT rebate you received.
What if I decide to sell my French property?
You can resell your real estate before the end of the 20-year term.
If you sell your property after 12 years, you’ll have to repay 8% of the VAT, as 20% VAT is spread over 20 years.
To qualify for a full exemption from capital gains tax, your rental income in the two years before the sale must be under €250,000 per year and other conditions must be met.
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
Read more:
Property Tax in France: The Ultimate Guide for Non-Residents Owning Property
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.
Can a UK company claim 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 program 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 height is not considered acceptable, and 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 following 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.
Learn more about taxes on your leaseback rental property in France.
Who can help me claim my French VAT refund?
Yes, tax is complicated, but the team at Property Tax International have got you covered. You don’t have to worry anymore about filing your French property tax return!
Property Tax International 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.
Property Tax International specializes in French rental income tax and has unrivaled knowledge of the local tax system. We can assist you with all property VAT recovery procedures.
Why choose us?
Here’s why clients choose Property Tax International over local accountants:
- Better value: Our services are more affordable than those of local accountants. You will reduce your property taxes, save money, and maximize your profit from your French rental property
- Expert peace of mind: With over 25 years of international tax experience, we ensure full compliance with US and global tax laws while securing all possible deductions.
- Convenience: File taxes across multiple jurisdictions online, with no need for several accountants. Our service is online- easy, fast, and reliable
- No language barriers: Our tax experts will handle the tricky tax documentation and communicate with the French tax authorities on your behalf.
Want to learn more? Follow our tax guide for holiday homeowners in France, so you know how to lower your property taxes and pay your French property tax bill online.