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French real estate investment: taxes to be paid at the time of the acquisition.




Acquisition of French real estate property gives rise either to VAT or registration Tax.




Should VAT be applicable, the acquisition is exempt from registration tax.




The acquisition of French real estate is applicable in some limited cases:




1-       Acquisition of a land to be build on




2-       Acquisition of a building to be demolished




3-       Acquisition of a building under construction




4-       Acquisition of a building to be strongly reconditioned




5-       Acquisition of a building under VEFA agreement[1]




6-       Acquisition of a building completed for less than 5 years should the purchaser be a real estate dealer and if it is the first purchase after the completion of the building.



Regarding situation 1 to 4, the acquisition is exempt from registration tax  only if the purchaser takes the commitment to build within 4 years as from the acquisition date.

In situation 1 to 6, VAT is applicable o the sale price at a rate of 19.6%. VAT has to paid at the time of the transfer of ownership (or upon conclusion of the VEFA agreement except if the seller has elected for VAT on cash basis- in such a case VAT is payable at the time of the payment of the sale price).

VAT is only recoverable if the purchaser is subject to VAT. Regarding individuals purchasing real estate, as private investment, VAT is not recoverable.

Real estate property falling outside the scope of VAT are subject to registration tax at a rate of 5.09% applicable to the sale price (or market value if higher) and payable at the date of the transfer of ownership.

Acquisition of French real estate triggers the payment of other costs such as advertising tax (0.715% payable in addition to the VAR in case of building acquisition), notary fees, mortgage registration fees (0.715%) and land registrar fee (0.1%).






[1] The VEFA is an agreement whereby the seller transfers immediately the property to the buyer on both the ground and the existing constructions while property on the part of the construction to be completed is transferred progressively as the construction work progress.












10/03/2009
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