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Reclaiming VAT on Your French Property

Navigating the terrain of VAT recovery on a French property may seem daunting, but with the right approach, it can prove to be a financially rewarding endeavor. Let’s embark on this journey to explore the possibilities and limitations surrounding VAT recovery, shedding light on how it can be a savvy investment strategy.

Can VAT be recovered on all properties for sale?

In France, VAT typically applies to goods and services, including buildings, yet its deductibility hinges on their designated use. New buildings earmarked for professional use, such as offices or shops, often allow for VAT deduction. Conversely, buildings exclusively designated for residential purposes generally preclude VAT recovery for buyers. However, there’s a notable exception: properties intended for tourist use through BIC para-hotelier rental.

BIC Para-hotelier Rental

Opting for para-hotelier rental for your property can pave the way for VAT recovery, subject to specific conditions. Para-hotelier rental mirrors hotel operations, albeit without the conventional hotel structure. Key features include short-term rentals (typically less than thirty nights), fully furnished accommodations, and the provision of essential hotel services. By embracing para-hotelier rental, property owners can unlock the opportunity to reclaim VAT on their purchase.

Upon choosing para-hotelier rental, property owners face a pivotal decision regarding management. Two options emerge: self-management or engaging real estate management companies. While self-management allows for more hands-on control, professional management companies offer expertise in rental operations, maintenance, and reservation management. The choice between a management contract or a commercial lease hinges on individual preferences and investment objectives.

Tax Implications of BIC Para-hotelier Rental

Registering with the Commercial Court Registry to obtain a SIREN number is the initial step toward declaring rental income and managing VAT obligations. French tax residents assume direct responsibility for VAT management, while non-residents with management companies benefit from simplified procedures. VAT recovery entails meticulous documentation and adherence to regulatory requirements, ensuring compliance with tax obligations.

VAT Regularization

An essential consideration for property owners is VAT regularization if the property ceases to be rented within twenty years of acquisition. In such instances, a pro-rata refund of the initially reclaimed VAT may be required, emphasizing the importance of long-term planning and strategic decision-making.

In conclusion, reclaiming VAT on a French property demands careful planning, diligent execution, and adherence to regulatory frameworks. Despite the intricacies involved, the financial benefits can be substantial for astute investors. Our team stands ready to provide guidance and support on VAT recovery, property acquisitions, SCI, and other tax-related inquiries. Reach out to us for expert assistance tailored to your specific needs and objectives or watch our video.

French Tax Online is a tax consultancy firm specialized in foreigners investing and living in France.

A member of the Budiz Company Group, which is a French chartered accountant registered with the Order of French Chartered Accountants (OEC).

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