1. VAT Relief for Property Renovation in France

The rate of VAT (TVA) for works concerned with the improvement, conversion, and repair of a residential property benefit from a rate of 5.5%, as opposed to the normal rate of 19.60%.

1.1. Eligible Properties

The property can be either your main residence, or a second home.

However, the relief is not available for a property under two years old, or for the construction of a new property.

1.2. Eligible Works

All routine repair and maintenance work to the property is eligible for the reduced rate.

The reduced rate is also available for additions to an existing property, provided the works do not increase the net surface area by more than 10%.

Thus, an extension, attic conversion, or creation of mezzanine, can all be carried out at the reduced rate, provided this rule is respected.

Improvement work to an existing property is also eligible for the reduced rate.

Thus, if you buy a complete ruin and undertake reconstruction of the property, the tax authority are likely consider it to be a new build and, therefore, not eligible for the reduced rate.

More precisely, you will pay the higher rate of VAT if you alter substantially more than half of either the existing external walls, foundations, or other 'structual' elements, or more than two-thirds of the totality of the existing electrics, plumbing, floorboards, heating, internal dividing walls and external doors and windows.

If you have a substantial renovation project to undertake, it can sometimes be difficult to determine whether or not you are eligible for the reduced rate, so some careful calculation with the architect/builder may well be required.

A swimming pool, tennis court, garage, or a large extension to an existing property are not eligible for the lower rate.

1.3. Eligible Persons

The reduced rate of VAT is only available on the labour and material of work carried out by a registered building professional.

Accordingly, if you are carrying out the work yourself, you will be buying the materials at the full rate of VAT, on which no reduced rate will apply.

However, if you then employ a tradesman to undertake the work, then this labour cost can be at the reduced rate.

1.4. Certification Process

The builder will present you with a certificate for you to sign confirming the work is within the rules.

You do not need to present this statement to the tax authority unless they specifically request it, but you must retain it for 5 years. A copy will also be retained by the builder for possible examination by the tax authority.

If the tax authority later decide that you have broken the rules, you would be liable for the additional VAT and not the builder.

1.5. Expiry Date

Whilst the relief was initially proposed to only be available until 31st Dec 2010, an EU agreement in 2009 has made it permanent.