VAT on disposal of PPR.

[ams]

Is VAT or TVA at 19.6% payable on the capital gain element when selling a principal private residence that is less than 5 years old.

 

ams

[Nick Trollope]

[quote user="ams"]

Is VAT or TVA at 19.6% payable on the capital gain element when selling a principal private residence that is less than 5 years old.

 [/quote]

No, but if you are the original owner and it is less than 2 years old, then yes.

[Anton Redman]

I thought the two year rule was about whether work done by artisans were repairs and therefore had the reduced 5.5% rate or were part of the new building costs and had the 19.6% applied. 

I thought if it was less than five years since compleation : If you paid TVA to a builder when you purchased the house then it is not payable. If you bought the materials and 'really' self built then it is payable.

My source is page 218 Taxation in France by Charles Parkinson. Time limits could have changed but I have not picked up on it.

[BJSLIV]

Anton is correct.

VAT is payable on the gain made on the first disposal of a property within the five years of the notification of completion.

Some of this cost can in theory be recouped when calculating the total price at which to market the property as the lower rate of Notaire's fee will apply.

[Nick Trollope]

Indeed he is, I misread the question.

I'll get me coat ....

[Anton Redman]

Sorry I will try not to do it again

[ams]

After spending many hours talking to tax people on the phone, i went into the local tax office today. i explained my query and they said that no tva is repayable in the case of a disposal of a PPR less that 5 years of age. This assumes that one would have already paid the tva to the builder in respect of the constuction of the house and to the land owner for the building land. essentially no tva is payable on any increase in the value of the property between the date of purchase and the date of disposal. the expected period of ownership should be a minimum of 8 months to include at least one payment of tax habitation and have utility bills in one's name showing normal consumption.

 

ams

[BJSLIV]

they said that no TVA is repayable in the case of a disposal of a PPR less that 5 years of age.

Correct . VAT is only ever repaid to registered traders if their input tax exceeds their output tax liability.

 This assumes that one would have already paid the TVA to the builder in respect of the construction of the house and to the land owner for the building land.

Partially correct. You will have paid VAT to the builder and subcontractors.  A private individual who purchases building land for his own use is not charged VAT.

essentially no TVA is payable on any increase in the value of the property between the date of purchase and the date of disposal.

Incorrect. The notary will deduct TVA at 19.6% from the proceeds of the first sale of any property that occurs within five years of completion being notified. allowance is made for VAT already paid so in effect the tax is levied on the gain.

the expected period of ownership should be a minimum of 8 months to include at least one payment of tax habitation and have utility bills in one's name showing normal consumption.

this is a test applied if the authorities think that someone is trading in property and is attempting to exploit the private residence exemption. It has nothing to do with the five year rule.

Try typing

cinq ans tva maison

into www.Google.fr

and you will find many people complaining about what they see as an unfair tax imposition. However if this tax wasn't levied every builder would first sell their newbuild at cost to an associate, who would then resell to the true purchaser, neatly avoiding VAT on their profit.

 

[ams]

It woul dappear that the tax inspector is clearly at odds with your opinion. I made it quite clear that it would be a disposal of a PPR of less than 5 years. You could be correct, but then where does one go to obtain a definitive answer.

If what you say is true, then having acquired the land which attracted no vat, then the revenue would then be imposing tva on its sale.

i understand the badges of a trade concept, however the tax inspector gave the information as stated in respect of the question that i posed to her.

 It has been my experience that it would not be possible for builders to sell properties at cost value to evade vat or taxes of any kind. That concept is a very old chestnut that has long been eliminated by all revenue authorities by simply imposing market value. As you are no doubt aware it would be a foolish builder to get on the wrong side of a tax inspector.

ams

[BJSLIV]

Have you read any of the French comments I suggested such as .....

http://www.lesiteimmobilier.com/info-logement/TVA-immobiliere-vente.aspx?panel=5-2

or

http://www.leparticulier.fr/vdq/impots/lire_fiche.asp?id_index=83&oparent_index=&id_fiche=362

[ams]

Just having a look right now. used your 5 years etc translated into english and found an article by Sykes Anderson LLP. The basic rule is as follows.

 

"Any sale of a property prior to its completion is subject to vat. The first sale of a property within five year of its completion is also subject to to VAT. Any subsequent sale, even within five years of of completion, and any sale at all more than five years after completion is free of VAT."

 

These rules do not apply if a property trader.

 

The tax inspector did ask me if i was a marchand de biens, i asked what was that and she explained are you a professional trader or estate agent. The answer was no.

 

The question that need to be answered is,

 

Does the sale of the house from the builder to us represent the first sale of a property.

 

We did get a vat invoice from the builder and the document H 1 to complete, which i believe commences the 5 year period. if it does represent the first sale, then no vat, if not then, i need to hit the brandy.

Your thoughts will be appreciated.

 

now to look at the other sites you mentioned.

 

http://sykesanderson.com/service_france/articles/french_property_VAT.asp

ams

[ams]

Thanks for the references, have downloaded them, as i expected all in french. i will ask my french teacher tonight to stray away from the grammaire and phonétique and try her hand at translating article that could be very rewarding financially. !!!!!!

 

ams

[ams]

Dropped into the local notaires office. i put the question to him and he agreed 100% with your view. I have now got two opposite opions both from official sources. i tend to go with yours, that is my basic feeling.

 

ams