Real estate VAT is a tax collected by the State on certain property transactions. It mainly applies to sales of new properties and building land carried out by taxable professionals acting within the scope of their economic activity. Unlike transactions between private individuals, which remain exempt from VAT, these professional transactions fall within the scope of value added tax. Are you concerned? Who pays and who collects VAT in a real estate sale? Here is a breakdown of VAT in the real estate sector.
What is value added tax in real estate?
Real estate VAT is a tax collected by the State on certain property transactions. It mainly applies to sales of new properties and building land carried out by taxable professionals acting within the scope of their economic activity. Unlike transactions between private individuals, which remain exempt from VAT, these professional transactions fall within the scope of value added tax.
Definition of a new property and building land
A property is considered new for tax purposes when it has been completed for less than five years and has never been occupied. This definition applies both to newly built properties and to older buildings that have undergone renovation work so significant that they are considered as new. A building plot refers to land on which construction is permitted according to the local urban planning scheme or any other applicable planning document. It is land suitable for construction, serviced or not, intended for future development.
Who is liable: professional seller or buyer?
The person liable for real estate VAT is in principle the professional seller: developer, land developer, property trader or any person subject to VAT acting within the scope of their economic activity. However, the cost of this tax is passed on to the buyer in the displayed sale price. The purchaser therefore pays VAT included in the total amount, even though it is the seller who then pays it to the tax authorities.
Table of VAT rates applicable according to property type
Type of property | Seller status | Applicable VAT rate
New property (less than 5 years) | Taxable professional | 20% (or 5.5% under conditions)
New property (less than 5 years) | Private individual | VAT exempt
Building land | Taxable professional | 20%
Existing property (more than 5 years) | Professional with option | VAT on margin
Existing property (more than 5 years) | Private individual | VAT exempt
New construction and purchase under VEFA
The sale of a new property or property in future state of completion (VEFA) by a taxable professional is subject to VAT at 20% on the total price. This rate applies automatically when purchasing from a developer or builder. On the other hand, transactions between private individuals remain exempt from VAT, and only transfer duties apply.
VAT on margin for existing property or resale
VAT on margin applies to existing properties sold by a professional when they opt for this regime under certain conditions. Unlike VAT on the total price, it only applies to the difference between the sale price and the initial purchase price. This regime mainly concerns buy-resell operations carried out by property traders, provided that the initial acquisition did not entitle them to VAT deduction.
Notary fees and real estate works subject to VAT
Notary fees are systematically subject to VAT at 20%, regardless of the type of property. To learn more about their amount, consult our guide on notary fees. Renovation works benefit from reduced rates: 10% for improvement, transformation or development works, and 5.5% for energy renovation works. For existing properties between private individuals, transfer duties apply instead of VAT.
How to benefit from reduced VAT at 5.5% in new properties?
Eligibility conditions and income thresholds
To benefit from reduced VAT at 5.5% when purchasing a new property, several cumulative conditions must be met. The property must be located in an ANRU zone or in a priority urban policy district subject to a city contract. The buyer must comply with the income thresholds of the Social Rental Loan (PLS) increased by 11%. The property must be intended as the buyer’s main residence, and the price per square meter is capped according to national benchmarks. This social homeownership scheme can be combined with the 2026 interest-free loan (PTZ), which significantly reduces the total acquisition cost. To check the exact thresholds and eligibility of your project, contact a Capifrance advisor or find out why investing in new real estate.
Checklist of eligibility conditions for reduced VAT at 5.5%:
Property located in an ANRU zone or priority urban policy district
Buyer’s income below PLS thresholds increased by 11%
Property intended as the main residence
Price per m² within regulatory limits
VAT adjustment over 20 years in case of resale
If you resell your property or stop occupying it as your main residence before a certain period, the adjustment period is set at 20 years from acquisition. In case of resale or change of use during this period, part of the initially saved VAT must be repaid to the tax authorities, proportionally to the remaining years. Certain exemptions exist, particularly in cases of professional relocation, disability or death. This rule ensures that the tax benefit effectively benefits households accessing homeownership who occupy their property over the long term.
How to recover or obtain a refund of real estate VAT?
VAT recovery for property traders or real estate agents
Professionals subject to VAT have a right to deduct. In practice, they can deduct the VAT paid on their purchases of goods or services from the VAT collected on their sales. This mechanism reduces the tax burden and optimizes company cash flow. To fully benefit from this right, it is essential to maintain accurate accounting records and keep all supporting invoices. In practice, being supported by an accountant or a notary specialized in real estate ensures compliant and secure VAT management.
VAT or registration duties: do you have to pay both during a sale?
No, they do not accumulate. When a sale is subject to VAT on the total price, registration duties are reduced to a fixed rate of 0.715%. Conversely, if the transaction is not subject to VAT, standard transfer duties (around 5.8%) apply, depending on the region. This distinction avoids double taxation and clarifies the applicable tax system according to the nature of the property and the seller’s status. To go further in optimizing your project, consult our guide on tax-deductible works.
Frequently asked questions about real estate VAT
Does VAT apply to the sale of a property over 5 years old?
In principle, a property over 5 years old is considered existing and is exempt from VAT in a sale between private individuals. However, it may be subject to taxation if the seller is a taxable professional. In this case, VAT on margin may apply, calculated only on the difference between purchase and resale price.
Does VAT apply to rental property?
Unfurnished residential rental is exempt from VAT without option. Furnished rental with hotel-like services is subject to VAT when at least three of the four services are provided. For commercial premises, the landlord may opt for VAT to recover input VAT.
What tax system applies to real estate transactions subject to VAT?
Several tax regimes coexist depending on the type of transaction. The sale of a new property by a professional is subject to VAT at 20% with reduced registration duties of 0.715%. For existing properties sold by professionals, VAT on margin may apply. Sales between private individuals remain exempt but are subject to transfer duties. The French tax code governs these regimes.
Does an sci have to pay real estate VAT?
It depends on its activity. A construction-sale SCI is subject to VAT, while a rental SCI is generally outside the scope unless it opts for VAT. It is recommended to consult a Capifrance advisor to analyze your situation.
Author
Frédéric Rémy – Director of Commercial Performance
A real estate professional for several years within the Capifrance network, I would like to share with you some essential advice to help you succeed in your real estate project with the support of our advisors.
