Can anyone advise on property development ?

[Jogra]

My husband and I have lived in France for a few years and have renovated our property.We are thinking of selling, and buying two houses:one to live in and one to renovate. Once house number 2 is sold we would buy house number 3 and do the same, hopefully making enough each time to fund our living expenses until the next house is sold.

We are wondering whether there would there be any advantages regarding Capital Gains Tax  etc in setting up as a business? we obviously intend to research the financial implications thoroughly and will seek legal advice but would appreciate advice from anyone doing a similar thing.

Thanks

 

[Mpprh]

Hi

I'm also interested in this.

Does " CGT roll over relief " exist in France ?

What are the requirements to qualify ?

Peter

 

[Owens88]

I second that request re: roll-over relief. I have sourced various French Gov docs but non mention it.

 

 

[BJSLIV]

I think the problem that non-professional property developers run up against is the 26% CGT levied on any property gains other than ones main exempt residence.

[Nick Trollope]

[quote]My husband and I have lived in France for a few years and have renovated our property.We are thinking of selling, and buying two houses:one to live in and one to renovate. Once house number 2 is sold ...[/quote]

This is what we do and there are LOADS of pitfalls.

a) An individual can "develop" 1 house per year without being registered as anything. If there are 2 of you, you can do 2 (obviously)! You will pay CGT at 26% (as a resident of France - 16% CGT plus 10% social charges), deducted by the Notaire at the time of sale.

b) CGT is payable on any "plus value" or added value of the house, which is the selling price less the cost of the property, the cost of the purchase (fees, etc), plus any renovation works (inc TVA) done by registered Artisans. HOWEVER, you cannot charge yourself for any work you do, so even if you are registered as a builder, none of your labour or materials will be taken into account. I'm sure that there is a way around this, but don't bother to try to form 2 enterprise and cross-invoice. It will be spotted!

c) You could register as a "Marchand de Biens" ( a seller of property). However, this has significant VAT implications, not least the fact that you must charge TVA on the property, to the final buyer (who probably won't be able to reclaim it) - this will overprice your house by 19.6% (and not 5.5%!).

d) With each property you must be sure that you can sell it at a sensible profit. Here, houses are not necessarily cheap because they are tatty. Don't expect to make more than a few % on each property. We can't earn a living doing 2 per year.

e) Look at new build - this is where the money seems to be, although the legal & VAT issues are horrendous. This is the direction we intend to take.

f) Finally (ha!) don't target the immigrant or holiday home market. Too small.

 

[adrianpmills]

Just a consideration. If you are looking at setting up a property development business, or engaging in property development as a regular source if income, you may be looking at income tax on trading profits (VAT implications too) and not capital gains tax - a lot probably depends on how quickly you intend to turn over the properties.

 

 

 

 

 

 

[Nick Trollope]

[quote]Just a consideration. If you are looking at setting up a property development business, or engaging in property development as a regular source if income, you may be looking at income tax on trading p...[/quote]

Yes, a Marchand de Biens does not pay CGT, only income tax. But, as I say above, the VAT makes it very difficult!