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Tax, VAT and TVA issues during renovation in France

TAX and VAT in property renovation

I am not a tax expert and any complicated financial transaction will need the advice of a qualified advisor. Here  I have listed some of the main areas that you might like to consider about tax and VAT in France.

Known as TVA in France, VAT has a standard rate of 19.6%

Currently, although it is under review, most renovation and building works and materials are subject to VAT at only 5.5%  Clearly this makes a very large difference to the total cost of work. (Note: spring 2007-the rules have become much more restrictive; it has become difficult to pay a VAT rate of 5.5% on complete renovations and significant changes to property in France, 19.6% is now much more common!!!)

This came about for a couple of reasons - to defend jobs in the building profession in France, and to reduce the number of people working on the black economy. There is now, not surprisingly, a lot of resistance in France among the building profession to the suggestion that this special low VAT rate be cancelled.

The primary constraint is that this rate only applies to work that is performed by a registered tradesperson. If you buy the materials yourself and do the work yourself you will pay 19.6% VAT on the materials.

This can lead to the curious situation where it is cheaper to pay someone to do the work than to do it yourself. For example, windows for your house may cost 3,000 euros excluding VAT. So you will pay almost 3,600 euros including tax at 19.6% to buy them yourself. But if you pay the same supplier to install them as well, you might pay 3,220 euros (VAT at 5.5%) for the windows and 350 euros for the installation. Hence you have saved 20 euros by getting the fitted for you. If materials and supplies represents a large part of the total cost of a part of the project this will be worth checking first. Doors, windows, shutters and certain forms of insulation particularly are expensive in relation to the cost 0f fitting.

 

The main cases where the reduced rate of VAT DOES NOT apply are:

See HERE for the specific rules for when a VAT rate of 5.5% applies.

Contrary to what you might hear or be told, the reduced rate DOES usually apply to the renovation of an existing building even if it has not previously been inhabited, and the conversion of a farm building that has never been inhabited. A building does not need to be a principal residence to apply. Under these circumstances or if your project is unusual in some respect I advise you to speak to the tax office about your specific circumstances, and seek official verification that the lower rate can apply.

The builders working on your property quite possibly do not know the up to date tax position, but may think that they do.

There is another time that VAT on buildings may affect you. If you sell a new-build property or a complete restoration property (i.e. it was completely uninhabitable when you bought it) you will have to pay VAT of 19.6% if you sell the property within 5 years. Your notaire will know if this apples to your property, or you may need to seek professional advice, since the amounts concerned are large, and there is a link with capital gains tax payable (not discussed here).

 

TAX

If you live full time in your property in France, and pay income taxes in France, you will find that certain expenses can be offset against your tax bill. these include certain central heating systems and certain insulation materials.

Precise details are beyond the scope of this site but leaflets and details are available at your local tax office.

 

 

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Original copyright 2007 barn renovation