The amount of TVA payable on building work is 19.6 % for all new builds and extensions, however there is
a reduced rate of 5.5% for renovations, so you should bear this in mind when buy property here. To be absolutely clear, creating new space does not benefit from the reduced rate of 5.5 percent, it is
only when you are restoring an existing habitation that you benefit from the reduced rate of TVA.
Example: An existing derelict house if renovated would benefit from a reduced rate of TVA, if the house was extended into the barn next door or had a new extension built, then these "new" areas of habitation would have TVA chargeable at the normal 19.6 percent rate and when the invoices were presented by the artisans all the work on the house would have TVA at 5.5% and all the new work would have TVA at 19.6%
There is no reduced rate of TVA on professional fees even though the project itself may benefit.
Will TVA at a reduced rate apply to your project?
Certain additions (such as a swimming pool or a tennis court) are considered 'luxury items' and are specifically excluded from the reduced rate. If you are unsure if the planned work qualifies or not, ensure that the tradesmen doing the work provide a written estimate showing the reduced rate (as described above) or confirm with your local tax office
To be eligible for the reduced rate most artisans will request that you sign a reduced rate 5.5% TVA attestation when you sign a quotation (devis). This is a declaration by you that the reduced rate of TVA applies to your project, should it transpire that your project does not qualify for the reduced rate of TVA then the attestation exempts the artisan from paying the additional TVA due and makes you liable.
Make sure you give every tradesman invoicing you the original of the certificate, completed by you, before the date of the invoices.
To assist you we have provided links that will allow you to download the two types of certificate together with information leaflets:
SIMPLIFIED TVA 5.5% CERTIFICATE
STANDARD TVA 5.5% CERTIFICATE
When the work is completed, the tradesman must provide you with a document certifying that the work was done at the reduced rate of 5.5%. All such documents, certificates, invoices and delivery notes should be saved until the end of the fifth year following completion of the work, as you are legally required to provide such documents should the Hôtel de Impots request them, so as to prove that you are entitled to the 5.5% rate. In practice, this is extremely rare, but it is worth filing the paperwork just to be safe.
Although a written estimate from a professional tradesman quoting 5.5% means that he can only charge you this amount, if the tax office should investigate (unlikely, but possible) and decide that 19.6% is due, it is you rather than the tradesman that will be responsible for paying the additional tax to the tax office. Of course, you can try reclaiming the additional costs from the tradesman that misquoted but success in this action would depend on the specific circumstances.
What renovations constitute a new-build?
• Heightening of the building or additional construction
• Renew more than half of the shell, namely foundations, other elements that determine the strength and stiffness of the building (roof, walls) or the consistency of facades (excluding cleaning)
• Replace more than two-thirds of the second fix work: non-load bearing floors, exterior doors, partitions, plumbing, electrical and heating
• Increase the floor area of existing premises by more than 10%.
TVA on a new build
The amount of TVA payable on building work is 19.6% for all new build. When an existing non-habitable building has been granted change of use to habitation (for example an agricultural barn being converted into a habitation) this is also classed as new build (it is a new habitation) TVA payable is also 19.6 percent.
TVA on Property Sales & Purchases
If you buy a new build property (i.e. under 5 years old) or a property which has had a complete renovation (e.g. it was uninhabitable before the renovation) then the sale of the property is liable to taxes at 19.6%. Consequently, before making an offer on a property or signing any contract, you should either be prepared to pay these taxes or ensure that they are not applicable (either by having a notaire confirm it, or having a clause in the contract where the seller agrees to accept any such costs should they be applicable). If you are buying a property which is almost 5 years old, it may be worth delaying the purchase of the property until you cross the 5-year threshold, thereby removing the need to pay TVA taxes.
If you are selling a property which is subject to TVA at 19.6%, be aware that informed purchasers will factor this cost into the price negotiations. Consequently, if you have a property which is close to the 5-year threshold, it may be worth delaying the sale until this tax is no longer payable.