Dreaming of a second home in France?
As the summer holidays draw to a close, you may find yourself dreaming of buying a second home in France (or perhaps even moving there permanently).
You may know that the standard VAT rate in France is 20%. But did you also know that subject to certain conditions, you may qualify for a reduced rate of 10% on work of improvement, conversion and repair of a residential property?
This rate is further reduced to 5.5% if the work you carry out leads to energy conservation and is eligible for the energy saving tax credit.
Some basic rules apply:
- The property can be your main residence or your second home as long as it is at least two years old
- All routine repair and maintenance work as well as renovation and improvement work is eligible for the reduced rate;
- The same is true for an increase in size as long as the net surface of the property is not increased by more than 10%;
- The reduced rate is only available on materials bought from and/or work carried out by a professional registered in France;
- You will have to sign a certificate for the builder and you must retain a copy of it for five years so that you can produce it should you receive a request from the French tax authorities.
And be warned, some pitfalls exist:
- If you buy a ruin and renovation/rebuilding work is very significant, the French tax authorities may reclassify your project as a new build. In this case the standard rate of VAT will apply;
- Swimming pools, tennis courts, garages and other large extensions are not eligible for the reduced rate of VAT.
Author: Stéphane Sintes, HLB France, COGEP