Real-estate VAT
Real-estate VAT is the value-added tax levied on real-estate transactions in France. The standard rate of 20% applies to sales of new dwellings (less than 5 years old) by taxable professionals. Reduced rates of 10% or 5.5% apply depending on the property type (social housing, assisted home-ownership, energy renovation) and approval conditions. Real-estate VAT is recoverable by taxable entities conducting a taxable activity.
Key points
- 20% rate on new-property sales (less than 5 years old) by taxable professionals.
- 10% rate: intermediate housing (LLI), qualifying rehabilitation works.
- 5.5% rate: social housing (PLUS, PLAI), social home-ownership in ANRU zones.
- Sales of existing properties between individuals: outside the scope of VAT (transfer duties apply instead).
- VAT recoverable for taxable investors (LMNP in serviced residences, IS-taxed SCI with taxable activity).
Frequently asked questions
How can a LMNP investor recover VAT on the purchase of a new apartment in a managed residence?
By purchasing a unit in a managed residence (student, senior, care home, tourism) and leasing it under a commercial lease to a VAT-taxable operator, the investor becomes a taxable entity. They can then recover the purchase VAT (20%) through their own VAT return. The rental commitment must last at least 20 years to avoid a VAT clawback.
Why are sales of existing (old) properties not subject to VAT?
The legislature chose to subject transfers of existing properties (more than 5 years from first occupation) to transfer duties (DMTO), commonly called notary fees, rather than VAT. These duties, approximately 7-8% for existing properties, are collected by the state and local authorities. The two regimes — VAT and DMTO — are mutually exclusive.
What is the difference between the 5.5% and 10% VAT rates in new construction?
The 5.5% rate targets strongly social-purpose operations: PLAI and PLUS social housing, home-ownership in ANRU zones, and certain major energy-renovation works. The 10% rate covers a broader segment including intermediate housing (LLI), approved rehabilitation projects, and certain less-restrictive ANRU-zone operations. Both rates require prior approval or an agreement to be applicable.
In practice
A developer sells 50 new units in a student managed residence under agreement. The 20 units allocated to social housing (PLAI) are sold with 5.5% VAT, the 15 intermediate units (LLI) at 10%, and the 15 market-rate units at 20%. The operator leasing all units recovers the VAT on its return, making the arrangement tax-neutral.
Official sources
- Real-estate sale and VAT · Service-Public.gouv.fr
- Housing and financing information · ANIL
- Mortgage credit (official guide) · Service-Public.gouv.fr