The VAT reclaim on your French property
Nowadays it is becoming increasingly common to sign a flexible rental agreement (not under the French leaseback scheme) when you buy a new-build ski property. This rental agreement (if contracted with in-house rental management company)then allows you to claim back 20% VAT on the property purchase price. Obviously being to claim back a full 20% on your property price is exceptional and a huge chunk of the total price, the reason why more and more property clients use this formula when buying a French ski property.
One condition, apart from using the in-house rental company, is for the property to be part of a new-build development. New-build French properties include 20% VAT in the price unlike resale properties (older than 5 years). See here a selection of such Alpine developments where you can claim back the 20% VAT on the purchase price, developments which are outside the French leaseback scheme.
How do you claim back VAT on property price
French Alpine developers use a specialist accounting firm to deal with that VAT reclaim against a fee, usually anything between 300-700 euros. Magin is one of the major firms in charge of claiming back the VAT for French leaseback or non-French leaseback developments in the French Alps.
When do you claim VAT on property price
The accountancy firm will claim back the VAT on your property once you have exchanged contracts and signed the deeds. Do not forget that when you buy a brand new ski property in France, usually off-plan, you start making payments in stages from the moment you exchange contracts and become the legal owner. For non-French residents, the accountancy firm will start the VAT reclaim procedure once a year, usually in January for the payments made the year before. If you exchange contracts on your brand new ski property, for example in November and make a 25% payment at that stage for terracing and start of works (based on the property price including VAT), the accountancy firm will start the reclaim of VAT two months later in January based on that 25% payment already made. If you have made several stage payments (for example 25% terracing + 10 foundation completion), the accountancy will ask for the reclaim on the 35% already paid.
To recap accountancy makes VAT claim once a year, usually in January for all the stage payments made the previous year.
When do you receive that VAT back on your French property
Once accountancy firm has claimed back the VAT on all payments made the previous year, you usually receive VAT amount back by June that same year. This happens every calendar year until you reach full payment (100%) of property price including VAT. This applies on the property + parking + cellar price but also on the furniture pack if this is the case.
Example with numbers:
Property price including VAT: 200,000 euros
Stage payments made that year:
-25% (based on property price including VAT) for terracing and start of works: 50,000 euros (paid in September). Of this amount, 20% is VAT: 10,000 euros
-10% (based on property price including VAT) for foundations: 20,000 euros (paid in late November). Of this amount, 20% is VAT: 4,000 euros
Accountancy firm applies at the start of the following year in January. The client receives 14,000 euros (10,000 + 4,000) back in May of that year (by June most clients receive their VAT back).
The same will happen for the remaining 65% of stage payments due on your French property purchase always following the same pattern with accountancy firm putting the VAT claim in January for all previous year stage payments made by you.
Example with dates for full stage payments:
-Deposit (on to escrow account at French notaire public) – 5,000€
-25% Start of works/Terracing – 25% NOV 2019
VAT reclaim placed JAN 2020 based on 25% property price including VAT
-10% Foundation completion – 35% MAY 2020
-20% Ground floor works – 55% SEP 2020
VAT reclaim placed JAN 2021 based on 30% property price including VAT
-15% Watertight (roof) – 70% MAY 2021
-10% Partitioning/Walls – 80% SUMMER 2021
-15% Completion – 95% NOV 2021
-5% Handing over the keys – 100% Dec 2021
VAT reclaim placed JAN 2022 based on 45% property price including VAT
French leaseback properties are different as usually VAT is ported by the developer so you only pay the property price without VAT. The only exception is that furniture is not considered as real estate therefore often you have to advance the VAT on that portion and then you receive it the following year.
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