Renovating Your French Property – Good News on VAT


As Dordogne property experts, we’re sometimes asked, by people wanting to buy a wreck, do it up and sell it on, what the sale value will be. But Dordogne property doesn’t work like that. The UK concept of moving in, doing up and moving on just doesn’t work.

The inherent profit in this kind of operation depends on speed: getting the work done quickly and selling on fast. Welcome to another country. Renovating Dordogne property takes time. The main contractor/subcontractor system in the UK scarcely exists in la France profonde. Co-ordinating the different trades (bricklayers, roofers, carpenters, electricians, plumbers, tilers, painters etc.) is a logistical conundrum at the best of times. When the tradespeople don’t share your language and have little understanding of a service culture the conundrum becomes a nightmare. It may be a good idea to do a preliminary course in Zen Buddhism to cope with the stress. More details please visit:-ninjanetworth.com simonparkesblog.com blogfeedletters.com marlonwayansnetworth.com decora-fashion.com rommedicalabbreviation.com babypetnames.com

Importing Labour

But perhaps you intend to bring tradesmen in from elsewhere? The Polish plumber, the Lithuanian electrician, the Romanian bricklayer… excellent people, all of them. But if the building inspectors learn what you’re up to, brace yourself for problems. People working in France need to be registered. The bad news is of course that this involves formalities and, of course, social charges. But if you are working with unregistered labour the consequences are equally dire. You will not be covered by insurance in the event of anyone being injured on site. If you have a surprise visit from an inspector from the local Dordogne employment department you will be subject to fines. Of course you will keep a low profile. But all it takes is for a disgruntled local to report you to the powers that be for all hell to break loose.

Capital Gains Tax

Capital gains tax will apply if you sell a property that is not your main residence – a holiday home, say, or a “do up and sell on” project – for a higher price than you paid for it. It sounds as if it would be easy to avoid this by simply stating that it is your main residence. But in that case you need to declare yourself French tax resident and pay your income tax and social charges (the equivalent of national insurance) in France. You can’t have it both ways.

Let us assume, however, that your prized Dordogne house is in fact a second home, and you have done it up and are going to make a healthy profit on the sale (quite a lot of assumptions here). In these circumstances capital gains tax will become due in full if you sell within five years after the purchase.

But, you will say, you can deduct from the gain the amount of your capital expenditure. Yes, you can: but only to the extent that the capital expenditure is supported by evidence in the form of invoices from persons and businesses registered in France. If you have paid people “on the black” these payments will not be deductible.

VAT

There is some good news on the tax front, though. For a number of years France has been at variance with other common market countries with the way it charges VAT on property. The law has provided that if you create a “new” dwelling by converting something uninhabitable (such as a barn) into accommodation, a VAT charge will be levied on the sale proceeds if a sale occurs within five years following completion of the works. This has been an unpleasant shock for people doing barn conversions. It has meant, for example, that a Dordogne barn conversion selling for 239,200 euros would only yield 200,000 euros to the vendor. And this is not apart from, but in addition to, any capital gains tax that may be due.

Under pressure from the European Commission, the French government has now amended its legislation. If you are a private individual not undertaking this kind of operation on a regular basis there will be no VAT charge. This operates with effect from 10 March 2010. Many people living in barn conversions will breathe a sigh of relief.


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