OFFPLAN NEWS

(02.06.2007 )
French property for sale Owners of Property in France Could Pay Extra VAT for Renovation Work

A tightening up of the rules on VAT for building work on houses could mean some owners will end up paying more for their new property in France.

In August 2006 the French tax office issued new guidelines about the VAT rate at which artisans can charge home owners when they carry out repair and renovation work.

Under the old system the property owners signed a simple declaration that the building was more than two years old and this allowed the builder to charge VAT at just 5.5 per cent - rather than the higher rate of 19.6 per cent. This saved homeowners more than ten per cent.

Under the new guidelines, however, these rules do not apply if the renovation work is so extensive that it is effectively deemed a new build. This might be, for example, when an old barn is turned into a house and the whole structure is altered.

The government has also made it clear that owners cannot get round this rule by simply doing half this work with one builder then completing the rest with another artisan six months later.

Crucially, the new guidelines make the home owner personally liable for his statement that he is eligible for the lower rate of 5.5 per cent. Previously if the tax office ruled that an artisan’s work was not eligible for the lower rate he had charged then the artisan himself had to make up the missing VAT from his own pocket. He was not able to claim it back from the owner.

From now on the owner will be forced to pay the missing VAT (the difference between 19.6 per cent and 5.5 per cent) if he is judged to have misled in his declaration.

Unfortunately, when the tax office issued forms for these new declarations in the summer they were so complicated that neither the artisans or homeowners knew how to fill them in.

The main organisation representing small building firms and artisans the Confйdйration de l’Artisanat et des Petites Entreprises du Bвtiment (CAPEB) protested to the government.

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