Recouping Value-Added Tax in France for a Brand-New House

Thinking of buying or selling your property in France? Many locations provide discounts or other enticements to Investors in an effort to increase tourism. But have you ever heard of a programme that reimburses buyers the VAT on a brand-new home?

That, at least, is completely true in France. An enticing inducement is the ability to recoup 20% of the VAT paid on a newly constructed home if it is rented out for business purposes.

You may be able to recoup as much as 20% of the purchase price of a brand-new French home through the property VAT rebate. It’s not only for those living in France, either!

Instructions for Receiving the Bonus

‘Classic freehold’ comprises the largest portion of the scheme’s qualifying property types. When you’re the only owner of a piece of real estate, you have complete freedom to decide how to put it to use.

If you are ready to rent out your newly constructed property for commercial purposes, you may be able to get 20% of the TVA (French tax) returned. A business lease and its accompanying paperwork are needed.

However, there are limitations to the freedom afforded by traditional freehold ownership. A minimum of eight or nine winter weeks and three summer weeks of availability are required. In addition, you can’t live there for more than 182 days each year.

• In order to participate in the lease-buyback program, you must abide by the following:
• You cannot use the home as your primary residence.
• You can only get the VAT rebate from the French Tax Association (FTA) if you rent out your property for 20 years or more*.
• Your rental house has to be completely equipped.

Obviously, this is a short-term rental for you.

At least three of the following four hotel-like amenities must be provided to tenants:

• There must be a lobby (where keys may be handed away)
• Duvet and sheet changes
• Breakfast provided (delivery is fine) Housekeeping services

After 5 years, the FTA requires a portion of the rental income to be returned if the landlord decides to discontinue renting out the property.

Take the case of someone who has just spent €300,000 on a brand-new ski cabin in the French Alps with the idea of using it for a few weeks each year as a vacation property. You may be able to get back the €60,000 (or 20% of the property price) in VAT if you begin renting out your home. By June of each year, you should have received your tax refund.

Many people in this position hire a property management firm to oversee their rental home while they are away. Guests should expect to pay an additional 25–35% (+VAT) on top of the nightly rate you choose. Included in this charge should be the cost of managing your house, communicating with visitors before, during, and after their stay, and coordinating cleaning and supply services.

Additional property types that qualify for the VAT refund programme include leaseback projects and do-it-yourself leasebacks. Homes in lease-back complexes have convenient on-site amenities including a swimming pool, a laundry room, and maid service.

Classic freehold flats or chalets may qualify for DIY Leaseback, which allows owners to recoup 20% of the purchase price from the TVA. Whether or if your property will be suitable for commercial long-term lease is a deciding factor. A management firm is typically involved in this process.

What are the advantages of the lease-back plan?

• You’re eligible for a twenty percent value-added tax refund.
• When you’re a guest at your own home, you may take use of the amenities and services provided by your management firm, too.
• Owning a piece of French real estate is a fantastic financial move in and of itself.
• Your vacation house might be a source of revenue for you.
• The first two years of ownership are exempt from Taxe Fonciere.