1. VAT Relief for Property Renovation in France
1.1. Applicable Rate
A reduced rate of VAT (TVA) applies for works concerned with the improvement, conversion, and repair of a residential property.
The rate is 10%, as opposed to the normal rate of 20.0%.
A rate of 5.5% applies to building works of energy conservation. The rate also applies to associated works carried out with works of energy conservation. That said, only those works eligible for the tax credit for energy conservation are eligible for this lower rate.
The following rules apply in relation to use of this reduced rate.
1.2. 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.
1.3. Eligible Works
All routine repair and maintenance work to the property is eligible for the reduced rate as are works of renovation or improvement.
The reduced rate is also available for an increase in the size of existing property, provided it does not increase the net surface area by more than 10%.
However, an increase in the height of an existing property is not eligible. Neither are balconies, loggias, a veranda, open parking area or a terrace.
You may also find that the tax office are unwilling to allow an extension as being eligible, even though it may be less than a 10% increase in the size of the property.
This is because, strictly speaking, an extension to an existing property is not eligible, although there seems to be varying practice adopted on the eligibility of such works and a lack of precision in the regulations. Thus, an extension to the property to house a new boiler provided it measures no more than 9m2 would be eligible.
Where there is doubt on this point in your case, you would need to consult your local tax office and get a written ruling.
Those projects involving major renovation and reconstruction of an existing property, which effectively creates a new dwelling, are excluded from being granted 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 (excluding finishes), foundations, or other 'structural elements; or
- more than two-thirds of the totality of the existing electrics, plumbing, floorboards, internal non-structural dividing walls and external doors and windows.
Within urban areas the heating system can also be added to this list.
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.
1.4. Eligible Persons
The reduced rate of VAT is only available on the labour and material of work carried out by a France 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.
1.5. 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, not the builder.
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