All about the VAT

Published on 21 January 2015

What every property investor should know about VAT

There are a number of advantages for investors when entering into a buy-to-let scheme with a French property. Under Civil Code governance, the scheme allows the owner of a property with Non Professional Furnished Letting status, to benefit from a number of scheme-specific advantages, including the application for the reimbursement of VAT, as well as several other financial savings.

What you need to know about a VAT rebate

If a buy-to-let property is a tourist residence and has an official status of Classified Tourist Residence, an investor can apply for the reimbursement of the VAT included in the price of the property. Up until 1st January 2014, the top rate for new properties was 19.6 per-cent and the interim rate was 7 per-cent. Since that date, however, the VAT rate for new properties rose to 20 per-cent, with the interim rate also rising, but by 3 per-cent to 10 per-cent, which is a not-inconsiderable reimbursement figure for an investor.

Pre-paid VAT rebates

In order to simplify the process and reduce the time spent by their investors waiting for payment, Pierre & Vacances-Center Parcs Group advances any applicable rebate. This means that, rather than an investor making a property purchase then facing the administrative impositions and standard delay in receiving payment, Pierre & Vacances-Center Parcs will advance the amount in question at the same time the deeds are signed and legally witnessed. In this way, an investor only pays the VAT-free price for their property, whilst adding a property valued with all taxes included to their portfolio. In other words, investors pay a tax-free price for a tax-valued property.

Other tax benefits

Under the French buy-to-let scheme, there are other financial advantages for investors. As buy-to-let incomes do not fall under the heading of property income, but are instead classified under the category of Industrial and Commercial Earnings, an investor may be able to use amortisation (or the reduction of asset value) to offset a number of costs. Other deductible costs include, yet are not limited to, loan interest, legal costs and accountancy fees.

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