selling house in france and TVA

[returner]

Hi, we moved to france and renovated a barn 2 years ago. We need to return to the UK for next Aug and will have been french resident and taxpayers for at least 2 years.

As such we are exempt from CGT as this is our only and main residence.

HOWEVEVER, can anyonce explain how the tva works as we have taken a barn and made a home, no doubt increasing the value a lot, maybe spending more, some with artisans at 19.6 and some at 5.5 percent and some we did ourselves.

I have scanned the net , been to our local notaire and no-one seems to know how to work out the TVA on the sale.PLease can someone help.

[jc]

An accountant??

[returner]

went to our local(french bilingual) accountant,

and he was clueless.

The reason I asked the original question, and having read

numerous threads on this website and others is that

none of the "experts" seem to know which in itself

seems to be thread over here. I have also been in touch

with a very well known firm of UK solicitors who specialise

in Moving to France and the advice was patchy and unhelpful.

I would have thought this was a very important subject for

many people that warranted a bit of airing.

[BJSLIV]

Like all VAT questions its basically very simple, though the detail can get quite complicated.

At its simplest if you sell for 1,196,000 Euros you will owe 16.39% of the total as VAT ie 196,000 Euros VAT.

However you can deduct from this any VAT you have paid out to Artisans for work they have done. You can  include the VAT on the fees for purcahsing the barn. 

You cannot offset any VAT on any bills where you have already had income tax rebates eg heating and insulation.

 

[returner]

Thanks,

can you explain to me where the 16.39%figure comes from.

Also, can I deduct materials purchased by me for the renovation.

I'm guessing you can deduct the cost of the barn in the first place too.

Am I wrong?

Thanks again...getting somewhere

[BJSLIV]

The 16.39% is in fact 19.6/119.6% of the sale proceeds.  IE out of every 119.6 Euros that you  sell for, 19.6 Euros are due as tax.

The price you paid for the barn is not really of any relevance. You simply deduct the VAT paid out to artisans, from the VAT calculated from the sale price,  to arrive at the net figure payable.

Unfortunately you cannot deduct any VAT on goods , paint etc that you purchased and used yourself.

[returner]

This isn't what I was hoping for, but, I am gratefull

for the imfo.

One last question I can think of,as the "artisans" didn't seem to have much of a grip on TVA either some charged

the higher and some the lower rate.

How does that work?

Thanks again.

[BJSLIV]

The lower rate VAT should apply to existing houses , more than two years old for minor changes or repairs.

If your project is a total conversion of a barn , rather than the modernisation of an old previously  inhabited hovel, then its unlikely that any of the work should have been charged at the lower rate. In any case if you are selling you will lose any savings as bills issued at the lower rate will simply increase the VAT payable now.

The person you need to talk to is a Notaire rather than an accountant. They are more clued up on property taxation than is your average accountant. After all it is the Notaire who will calculate the amount payable. You might want to see if you can find the most sympathetic one especially if there is any chance of apportioning the work between renovating the previously a previously inhabited house and a newly converted barn.

[returner]

This may be the nitty gritty, and maybe where the artisans got muddled.

The barn with longiere attached was bought with new mezzanines in, new stairs, water and electrics still

attached, new window surrounds made, but no windows, and new roof.

We have finished the work.

Is there a grey area here, ie do internal non load bearing

partitions, new bathrooms etc make us VAT liable at all.

What are the criteria.It seems to revolve around newly formed habitable floor space, but this was already habitable(renovations started in 1999 under the old owner)

Blimey, thanks BJSLIV. Wish I'd asked earlier

PS Asked our local notaire and he wants us all to go the nearest tax office and talk it over there(says he's unclear...says we have to pay TVA on my wifes stable for the horses! Surely he's wrong...doesn't habitable refer to humans because you wouldn't want to live in there)

[BJSLIV]

As I said at the start things can start to get complicated.

VAT is paid on the first sale of a building within the first five years after the building is notified to the authorities as being completed. So has this notification taken place either prior to or since your purchase by submitting form H1?

If there were no windows I doubt if it was done prior to your purchase

When you purchased the house did you pay VAT on the building as a "work in progress" ?

If as you say there was an existing house then I assume that's how you qualified for lower rate VAT on some of the work

Its going to be quite complex because I'm guessing that  potentially you have three parts of the project....

   An existing house which you have renovated which unless it was a total wreck is probably not liable to VAT on the sale.

   A converted barn which will be liable to VAT for the five year period after completion.

   A renovated barn , for the  use of animals, which could like the original house escape VAT.

It will require some potentially complex negotiations so as  to apportion the cost of the works to the appropriate  elements  so as to minimize the tax liability.

 

 

[returner]

I think this may be the last question then.

The barn we live in is not completed,

needs walls finishing, bare concrete on floor, pointing outside

all needs doing etc.

If we do not finish and therfor do not submit form H1, and sell , is the sale for us vat exempt?

I know the sale price would be lower but it might be better

Also, as a ludicrous example, say we had bought the barn with 1000acres and it cost 2million euros, but the barn element had gone from being worth 50k euros to 150k euros after works. Am I right that if we were liable for tva, ie sending off H1 and selling within 5 years that the tva would be 16.39% of around 2million euros, minus artisans bills( not much)

This sounds less like a tax and more like a way too penalise.

Interested to hear what you think.

[woody2122]

  so if you sell a barn to someone within 5 years of buying it you pay 16.39 tva on the amount you sell it for and what about if it is over 5 years do you pay the 29 tva because thats what i was told or am i getting confused with  CGT on the sale of a barn

[BJSLIV]

If you sell a part completed barn then you still pay the VAT, otherwise every builder would always sell his houses incomplete.

As for the newcomers question if the house is your main residence you don't pay CGT but if you sell before five years you do pay VAT.

However if its a maison secondaire if you sell within five years you pay both VAT and CGT whereas after five years its CGT only.

The rate of CGT is 16%   if you are not French resident (plus any UK liability, but 27% if you are resident in France.

 

One other thing to bear in mind is that the Notaires fees for a property over five years old are higher than for a new property, so you need to take that into account as this impacts on the percentage of the  purchaser's spend that the vendor will receive.

For example lets assume that you wanted 200,000 for your house , and that you would have a liabaility of 8% VAT , because you had already paid half of the VAT during construction. The vendor would have to pay 4,700 fees so you would receive 184,000 of his spend of 204,700  roughly 90% of the purchasers outlay.

If the house was more than five years old, then the fees would be 13,500 so you would receive 200,000 out of 213,500 roughly 94%.

In other words the loss isn't always as much as you might think.

It all depends on how you believe purchasers evaluate their total spend.

 

[returner]

Thanks BJSLIV

For all the imfo.

[woody2122]

how do the authorities know if the property is your main resedence  or maison  secondaire, i work in the uk but my holiday home  is in france

[BJSLIV]

A French resident would normally receive his administrative papers tax returns etc at his main residence. If you aren't in the tax system at all its a pretty good start down the secondaire route.

[Gyn_Paul]

[quote user="woody2122"]how do the authorities know if the property is

your main resedence  or maison  secondaire, i work in the uk

but my holiday home  is in france[/quote]

Er Hello ???

just a guess, but I think the answer's there in the question !

p

[Idealdeux]

One other thing to bear in mind is that the Notaires fees for a property over five years old are higher than for a new property, so you need to take that into account as this impacts on the percentage of the  purchaser's spend that the vendor will receive.

 

Hi - Just butting in here, hope you don't mind, but can you just clarify when a building is defined as a property.  Our building was granted property/living status when we bought it (sorry can't remember the proper name for it) 5 years ago although the building is roughly 150 years old.  So when the notaire considers the fees to apply using the 5 year rule does this come into force from when it was built or when it was deemed acceptable for it to be used for habitation?

Also is there a set fee for the notaire or does it vary from one to another?

Just trying to get things straight in my mind as we are seriously considering selling our French house(secondaire/we are UK residents) which is practically finished apart from the kitchen but hasn't as yet incurred any taxes because it has been a work in progress.

Thanks.

[BJSLIV]

If the building is still in the process of conversion , ie the notice of completion and/or the H1 form has not been submitted, then the five year period has not yet started. VAT will automatically be deducted from the sale price.

Noatires fees  vary very  little , as most of the cost is in fact government taxes being collected and set rates of charges.

[Monika]

This is quite an "old" thread which came up when I searched.  You are so knowledgable BJSLIV and may I also pose a question to you (or anybody else as clever) regards this subject of having to pay TVA.

When we bought our Maison secondaire it was a very modest four wall affair, also a maison secondaire, with one room, kitchen water and electricity (no bathroom etc.) We have had substantial renovations and an extension done, increasing 35 square meters to 90 square meters (we paid on everything 5,5 % TVA). Would this be classed as a conversion or renovation and would we have to pay TVA if we sell within five years?

[dasilva]

Can anybody be specific and explain the repayment of TVA on leaseback?

Our managemnt company dont pay the rent and havent done so for 12 months now so they are being evicted,if it is they who have broken the lease do we still have to repay TVA

How long after eviction do we have to pay

Can we offset losses and legal fees against TVA

How do the TVA office know weve evicted the management company

Any help would be of use as I get conflicting answers?

 

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