In France, the rental with services of a furnished property allows one to save 20% of the purchase price of the new property by recovering the VAT.
How ?
Upon the purchase of your property, sending the tax authorities a VAT refund request form allows you to recover 20% of the paid amount. The best way to complete and send this form is to hire a French accountant.
What are the conditions?
The 20% VAT refund works for a property purchased new and rented out on a short-term basis (for example weekly rentals). The property must be furnished and the owner has to offer at least 3 of the 4 para-hotel services listed below:
- Reception/handing over of the keys to the guest
- Supply of sheets and household linen
- House cleaning upon arrival and departure, plus at least once a week
- Homemade breakfast or delivery
For example, a fairly standard one-week rental with hand delivery of the keys, arrival and departure + mid-week cleaning, and supply of sheets and towels allows VAT to be recovered by the owner.
How long do I have to rent out?
Rental of a furnished property with services must last for 20 years. However, if you decide to no longer rent your property, you can do so by reimbursing the VAT pro rata temporis for the remaining period up to 20 years, that is 1% per remaining year.
For example, if after 10 years you no longer wish to rent your property, you can stop the rental by paying back the tax authorities the corresponding amount of VAT you were granted for that period of time, i.e. 10%.
Can I resell my property?
Even having recovered the VAT, you are free to resell your property at any time. If this resale occurs after 20 years, there is no constraint whatsoever. If the resale occurs within the 20 years period, you have two options regarding the VAT rebate:
- Either the purchaser of your property wishes to pursue the same type of rental. No amount of VAT must therefore be returned, since the conditions remain the same with the new owner.
- Or the purchaser does not wish to continue renting the property.
In that case, if the resale takes place, for instance, 10 years after the acquisition of the property, you must refund the Tax Administration a pro rata amount of 10% of the purchase price in return for the VAT refund you have been granted upon purchase.
How do I manage the rental of the property?
The rental of your property can be managed by a management company, a tour operator, a real estate agency, a hotel… or by yourself! The rental agreement allows you to book a few weeks for your personal occupation. From one season to the next, you are free to change the rental method and your rental partner, if any.