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When selling real estate, and depending on the case, the VAT may vary. How to be exempt? And how to react to a property dealer?
If the building is less than five years old
In this case, the sale of the building is subject to VAT at the rate of 20%. This transfer is also subject to the land registration tax. The VAT, paid by the assigning company, can be recovered by the real estate company under the conditions of common law. In this case, the real estate company will have to opt for VAT, under the rental. Please note that this option must be made during the month preceding the month of acquisition.
If the building is more than five years old
In this case, there are two ways of considering the sale for tax purposes.
First of all, it can be exempt from VAT and subject to the land registration tax. In this case, the VAT exemption will trigger a repayment by the seller of the VAT that he was able to deduct for the acquisition or construction of the building. This repayment is partial and is calculated over a period of 20 years. It is not final for either party, provided that a transfer certification system and a mechanism for reimbursement by the purchaser are put in place. The amount reimbursed will be subject to the land registration tax.
The second formula is simplified: the sale is subject to VAT and the land registration tax. In this case, no refund will be requested from the seller. Each of the formulas will have to be studied on a case-by-case basis.
For a sale between real estate companies
In the event that the two real estate companies rent out the building with VAT, the sale is subject to a specific VAT exemption regime and no VAT is to be repaid by the seller. The idea being that the purchaser continues the activity of the seller, it is therefore necessary to provide the purchaser with documentation allowing him to follow the history of the right to deduct VAT. Such a sale is also subject to land registration tax at the rate of 5.0906% if the building was completed more than 5 years ago, or 0.71498% if the building was completed less than 5 years ago.
For a sale to a property dealer
This situation is specific and the parties must analyze the VAT regime they intend to apply on a case-by-case basis. When the building is less than five years old, there are no particular difficulties. On the other hand, if the building has been completed for more than five years, the sale is exempt from VAT. It will generate a repayment of VAT by the seller while, in principle, the mechanism of certification and reimbursement does not work with a property dealer.
The parties will study the interest of subjecting the sale on option to VAT, the latter being recoverable by the merchant of goods under the conditions of common law. The parties will also reflect on the possibility of using the transfer certificate, which has been extended since September 2011 to property dealers who rent out the building for more than a year.
For a sale to a promoter
When the building has been completed for more than 5 years, the sale is, in principle, exempt from VAT and triggers the repayment by the seller of part of the VAT deducted for the acquisition or construction of the building. ‘building. In principle, this VAT cannot be transferred via the mechanism of the certificate to the promoter, since the latter demolishes the building. The parties must therefore discuss the interest of subjecting the sale voluntarily to VAT on option. This option will allow the seller to avoid any refund of VAT. In addition, this VAT will be recovered under the conditions of common law by the promoter. Finally, such a sale will be exempt from land advertising tax, provided that the promoter undertakes to construct a new building within 4 years from the date of acquisition. In this case,
Société d’Avocats DAMY, Nice, corporate tax law – real estate VAT, Update 2022