VAT (TVA) at 10% instead of 20%
Don’t miss out on it!

Reduced rate VAT for your renovation projects.

Did you know that most renovation and building works and materials for renovation are subject to VAT (TVA) at only 10% as opposed to 20% on all other building work?

Of course, this can make an enormous difference to the total cost of work. The reduced rate applies to most renovation or improvement of an existing property (fitted kitchens and bathrooms, heating, air con, aerials, loft conversion, some garden works……..)

The reduced VAT rate does NOT apply to:
• new builds (properties over two years old)
• Extension leading to a new build (where more than one third of the ‘gros œuvres’ (foundations or supporting walls) are renovated)
• Building where the existing height changes. (ie if you were to add another level, tax would apply at 19.6%)
• ‘luxury’ additions, such as a swimming pool

This reduced VAT only applies to registered tradesmen and builders. If you do the work yourself, you will of course pay 20% VAT on all materials. This means that if materials and supplies represent a large part of the total cost of your project, it can actually be cheaper to pay someone to do the work than to do it yourself! It is always worth checking out both options.

The reduced rate…
DOES usually apply to the renovation of an existing building even if it has not previously been inhabited (as long as it complies with the rules above)
DOES NOT need to be a principal residence

David Crawford of Opalegal Limited adds more detail to the above.

French VAT – 10 OR 20%?

The system of taxing, works of maintenance, repair and renovation, (but not extension) at 10% instead of the general 19.6%, was due to expire at 31 December, 2005.

The French government has now, after “bitter” negociations, extended the scheme to the end of 2010. The agreement of all other E U member states was finally granted on 1 February, 2006.

To obtain this agreement the French government has clarified and added to the requirements in order to qualify for the 10% with regard to works completed after 31 December, 2005.

From now on, the reduced VAT rate of 10% only concerns renovation, transformation or improvement work, carried out by professionals, on buidings more than TWO YEARS OLD. NEW BUILDINGS do not qualify for the 10% VAT rate. This measure also prevents the gradual carrying out of stage works on several, sites quaintly referred to as “le saucissonnage”!

To which buildings does it apply?

Reduced rate Non-reduced rate
– Private houses
– Main or secondary homes
– Outbuildings of private houses (garages, terraces, balconies, attics, etc… as long as they are part of the main building)
– Driveways
– Construction or repair garden walls and bounderies (expect edges)
– Building for professional purpose
– Gardens (landscaping and maintenance)
– Garden path
– Sheds and green houses

Type of work

Reduced rate Non-reduced rate

– Installation or repair of heating system and air conditioningAlso excluded are works, again carried out over a period of two years or less, which result in the creation of SIGNIFICANT SURFACES, which apparently means more than a 10% increase in the surface area of the existing property.

The client has to certify that the work will not result either in a new building, or an increase in the surface area of an existing one by more than 10%, when he also states the age of the property and its use. He must keep a copy of this certificate, as well as the receipted bills of the contractors who carried out the works, until 31 December of the fifth year following completion of the work. He is also made liable for the balance of the VAT, together with the contractor, if these statements prove to have been inaccurate.

As you may have heard VAT is also payable on new buildings. If the work of renovation is so extensive that it could be called a new building, or the adding of a storey, then VAT on its sale will be chargeable. The following work of renovation will give rise to such a charge to VAT:

-the majority of the foundations.
-the majority of the building apart from the foundations providing the ‘resistance and the rigidity’ of the building (timbers, load bearing walls, slabs…)
-the majority of the external walls
-the majority of the second fix elements as defined by decree (in particular floors, exterior doorframes, internal doors, electrical installations, sanitary ware and plumbing).

These VAT criteria, applicable from 1 January 2006 apply

-if the purchase of a property to renovate gives rise to a charge to VAT (just as if it were a building plot) or, alternatively, land registry fees ( given that the purchase of such a property by an individual with a view to its being used as a dwelling always attracts land registry fees)
-if the completion of the works gives rise to the payment of VAT on a notional “delivery to oneself”
-if the sale of a renovated property within five years of completion of the works, gives rise to a charge to VAT or to land registry fees.

BLOC NOTES:

(1) There is a draft replacement double taxation treaty being discussed between the governments of U K and France. At present if you leave the U K and purchase a property which is your principal private residence in France, this is exempt from CGT as is your ‘former’ U K home when you eventually sell it. This ‘advantageous’ situation is due to end in 2007 under the new treaty. The U K property will become chargeable to U K CGT. If you find yourself in this fortunate position I recommend you dispose of the U K property before 2007, even if you purchase a replacement. In this way you will ‘flush out’ the gain, which may have built up over many years, and replace it with a no-gain, for the time being at least, property.

(2) A client of mine has recently had a nasty surprise. He has been doing up a ‘ruin’ next to his dwelling in such a way as to incorporate it into that dwelling, but it can also be used independently. This situation give rise to two types of local, one-off, taxes, viz.

a. Taxe Locale de l’Equipement (TLE), and

b. Taxe Departementale Pour le Financement des Conseils d’Architecture d’Urbanism et d’Environement (CAUE)

These are related in amount directly to the additional surface area created, or brought back into commission. TLE is to reflect the increased usage it is deemed you will be making of the local infrastructure. The CAUE seems to be for the work done in relation to the planning application and Certificate of Conformity. The rate of tax depends on the use to which the property is put and there are TEN different rates. For a residential property extended by 100 m2 these taxes are 1650 and 165 respectively!

David Crawford
Opalegal Limited.
Tel/fax/0845 230 9570
Mobile:07813 06 75 19

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