Property Renovation in France

Important: Please read also the comments that follow this post, which mention the changes in the regulations since this post was made - it is now harder to get reduced rate VAT on conversions and renovations than at the time of the original post (note added 3/5/07)

VAT on building renovations is usually charged at 5.5% instead of 19.6 %.

This reduced rate applies only to the ‘improvement, transformation and making habitable’ of buildings more than 2 years old.

Will VAT (TVA) at a reduced rate apply to your renovation project? (Read on …)

First let me be clear - I am not a tax expert and any complicated financial transactions will need the advice of a qualified accountant. In this section I have outlined some of the main areas that you might like to consider about tax and VAT in France.

VAT

VAT is known as TVA in France, and has a standard rate of 19.6%

Currently, although it is under constant review, most renovation work, building work and material purchases (as part of a renovation through a registered builder) are subject to VAT at only 5.5% This makes a significant difference to the total cost of work.

The reduced TVA rate came about for a couple of reasons - both to defend jobs in the building profession in France, and to reduce the number of people working on the black economy. There is now a lot of resistance in France among the building profession to the suggestion that this special low VAT rate be cancelled. (Read on …)

Some fortunate people are in the position that they have sufficient funds upfront to pay for both the property to renovate, and also for the renovation work itself.

For many others, the dream of renovating a property can’t wait until the funds exist, and the project needs additional funding. Therefore the problem of finding a mortgage and choosing the best financing method arises.

The following suggestions about French property mortgages apply mainly to those who are keeping their employment , and a home, in the UK during (and perhaps after) the renovation work. It would be difficult, probably impossible, to simply arrive in France without any employment and immediately get a mortgage to buy a run-down house to renovate. (Read on …)

One day the project will actually be complete! When the workers are on the point of leaving, you need to check that all the work is completed as planned. Specifically, you need to check that the work has been completed as per the devis, and that you are satisfied with the work.

As the work has been progressing you will have been monitoring progress, and checking that things are happening as you expect. By a stroke of good planning, the entire workforce will disappear each day from midday to 2pm, giving you ample opportunity to check things over without looking as if you don’t trust them. It is worth doing this if possible. On one occasion we had doorways added that were 50cm too low; on another, a wall was built without leaving a hole for the window to be added later. These things do happen, and they are much easier to correct straight away than to alter them later on. (Read on …)

How much should you pay for a renovation property?

1) try to estimate the cost per square metre of a renovated house in your chosen area, and of roughly the same size as your propsed project - ideally do this for several properties to get an average value per square metre
2) calculate how many square metres your renovated property will have, of internal floor space

3) Using the above estimate how much your renovated property might be worth

4) Deduct the proposed purchase price from this figure (Read on …)