Embarking on the journey of reclaiming VAT on your French property might seem like a complex task, but with the right approach, it can become a lucrative endeavor. Let’s delve into the intricacies of VAT recovery, shedding light on its potential benefits and limitations in the realm of property investment.
Is VAT Recovery Possible for All Properties?
In France, VAT is typically applied to various goods and services, including properties, yet the ability to recover it depends on the property’s designated use. Generally, new buildings intended for professional purposes, such as offices or shops, allow for VAT deduction. Conversely, properties solely designated for residential use usually do not permit VAT recovery for buyers. However, there’s a notable exception: properties intended for tourist use through BIC para-hotelier rental.
BIC Para-hotelier Rental: Unlocking VAT Recovery Opportunities
Opting for para-hotelier rental for your property can open the door to VAT recovery, subject to specific conditions. Para-hotelier rental operates similarly to hotels but without the traditional hotel structure. It involves short-term rentals (typically less than thirty nights), fully furnished accommodations, and the provision of essential hotel services: personalized key handover, cleaning of the premises, breakfast, linen…
By embracing para-hotelier rental, property owners can potentially reclaim VAT on their property purchase.
When choosing para-hotelier rental, property owners must decide between self-management or engaging real estate management companies. While self-management offers more hands-on control, professional management companies provide expertise in rental operations, maintenance, and reservation management. The choice between a management contract or a commercial lease depends on individual preferences and investment goals.
Tax Considerations of BIC Para-hotelier Rental
Registering with the Commercial Court Registry to obtain a SIREN number is the first step toward declaring rental income and managing VAT obligations. French tax residents bear direct responsibility for VAT management, while non-residents with management companies benefit from simplified procedures. VAT recovery requires meticulous documentation and adherence to regulatory requirements to ensure compliance with tax obligations.
VAT Regularization: Planning for the Long Term
Property owners must consider VAT regularization if the property ceases to be rented within twenty years of acquisition. In such cases, a pro-rata refund of the initially reclaimed VAT may be necessary, highlighting the importance of long-term planning and strategic decision-making.
In conclusion, reclaiming VAT on a French property requires careful planning, meticulous execution, and adherence to regulatory frameworks. Despite its complexities, the financial rewards can be significant for savvy investors. Our team is ready to offer guidance and support on VAT recovery, property acquisitions, SCI, and other tax-related matters. Contact us for expert assistance tailored to your specific needs and objectives or view our informational video.
The author: Géraud is the co-founder of The French Tax Representative and a chartered accountant by training, specialising in real estate and international clients since 2017. He and his team help several hundred individuals and companies each year with their French tax management.