Lots of places have incentives in place to attract buyers to boost tourism. But have you ever heard of an incentive that allows buyers to purchase a brand-new property and claim back the VAT?

Well, that’s entirely the case in France. There is an attractive incentive that allows 20% VAT reimbursement on new-build residential property if you make it available for commercial renting.
The property VAT rebate could save you money as you can end up reclaiming 20% of your new-build French home’s purchase price. Plus, it’s available to non-French residents!

How to qualify for the incentive

The most common property type eligible for the scheme sits under ‘classic freehold’. This is where you own the property and can use it for your own exclusive use or rent it out – it’s entirely up to you.

You may be eligible to claim back 20% TVA (French tax) on your new build property if you’re willing to make it available for rent on a commercial basis. You must fill all the requirements and sign a commercial lease.

While classic freehold allows property owners to be quite flexible, there are restrictions. You must have the property available to rent for at least 8 or 9 weeks in winter and at least 3 weeks in the summer. Plus, you mustn’t occupy the property for more than 182 days a year.

The requirements for the leaseback scheme are as follows…

• The property must not be your primary residence.
• The French Tax Association (FTA) grants the VAT rebate only if you rent out your real estate for a period of 20 years or more*.
• The property you’re letting out must be fully furnished.
• You must be renting it out on a short-term basis.
• You must offer the tenants at least three of these four hotel-like services:
  It must have a reception (for handover of the keys)
  Linen and bed changing
  Cleaning of the property
  Breakfast available (delivery service is acceptable)

*If you decide to stop renting your property out after 5 years, you will have to pay part of the money that you received back to the FTA.

For example, let’s say you’ve just purchased a new-build holiday home in the French Alps for €300,000 with the intention to use it for a few weeks a year. If you decide to start renting out your property, you should be eligible to reclaim the 20% VAT element of the property price, i.e. €60,000. Each year you should receive the refund from the previous year, by June.

Lots of people in this situation work with a rental management company that manages their rented property while they’re not there. Please bear in mind that they may charge 25-35% (+VAT) of the nightly rate you ask from guests. This fee should include management of your home, communication with guests, prior and during their stay, plus management of supplies and cleaning services.

Other types of eligible property you can reclaim VAT on

There are other property types available on the scheme which include leaseback developments and DIY leaseback. Leaseback developments are specifically designed residential plots with extra services and facilities on site e.g., shared pool, laundrette, cleaners etc.

DIY Leaseback is available to classic freehold apartments or chalets and property owners could reclaim 20% of the price from the TVA. This depends on if you’re willing to make your property available for long-term rent on a commercial basis. This usually involves a management company.

What are the benefits of the leaseback scheme?

• You can claim back the VAT on your purchase price (20%)
• When you stay in your property, you too can benefit from the services your management company provides.
• You have your own French property, an incredible investment in itself.
• You’re able to earn money on your holiday home.
• You don’t have to pay Taxe Fonciere for the first two years.

Written by PropertyGuides for Rightmove