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Leaseback property : VAT…risk or opportunity ?

NewsLetterFebruary2006 DoYouKnow….. ?

Leaseback property : VAT…risk or opportunity ?

►On most websites promoting leaseback property in France it is said that
buyers benefit from a vat rebate of 19.6% ! First of all if the vat rate
in France is 19.6% the rebate must be calculated as follow:

Property price without vat: 100.000€
Vat 19.6%: 19.600€
Total: 119.600€

In my opinion the rebate is 19.600€ divided by 119.600€ which is 16.39%!
When you are buying a car and the seller says you got a rebate of 5%
you calculate it on the full price and not on the price without vat!

So compared to conventional property the rebate is 16.39%.

►Then all websites do say that in case of selling your property before
20 years you will have to repay part of the vat to tax authorities.

Let’s see the legal articles……

Article 210, annexe II, CGI says:
"If a building is sold before the beginning of the 19th year after the acquisition, the seller will have to repay part of the vat which have been initially refunded to the buyer. The vat is calculated by 1/20th for each remaining year.”
So it is clear, the owner will have to refund part of the vat. But…but all websites forgot the following:
“The 4th of article 210 says that the new buyer has the right to deduct the vat that has been refunded by the former owner. So in practice the seller invoices the new buyer from the vat he has to repay to tax authorities! And the new buyer will then be refunded immediately by French tax authorities!! »
So the impact is totally neutral in case of resale of a leaseback property before 20 years.
So obviously Vat is clearly an opportunity as far as leaseback property is concerned.
Next: how to compare the price of a leaseback property with conventional property in France. How to be sure that the price of a leaseback property is not overpriced…

Bertrand Le Mire
www.clvproperties.com®

Bertrand Le Mire | Date Published : 2006-10-05 16:54:44