top of page

[Dry goods] Want to sell a house but don't want to pay VAT? Enough to read this one!

​Red Line Intelligence Group

In France, different types of property taxes are involved in buying, housing and selling properties. For a detailed review, please refer to: Investing in French real estate: where is the most tax payment? What are the tax reduction policies?


Buying a house in France as an investment asset will face a high value-added tax (L'impôt sur la plus-value) when it is sold: 19% income tax rate (Impôt sur le revenu) and 17.2% social security tax rate (Prélèvements sociaux), although from From the sixth year of purchasing the property, you can enjoy a phased reduction, but it will undoubtedly still compress the investment income. But I believe everyone must have heard of the tax exemption system for the main residence (Résidence principale). So what kind of property can be classified as the main residence and enjoy the VAT exemption policy? Today, Red Line Real Estate will prepare a reasonable tax-free strategy for everyone.

01/ Conditions for selling an investment house for the first time without paying VAT


When you are not the owner of your primary residence, but you sell your non-primary residence for the first time (and only once) (Résidence Secondaire / Investissement locatif)  All (or part of) the funds obtained have purchased the primary residence within two years from the date of sale, in which case you dispose of the non-primary residence without paying VAT.


02/ How does the "secondary residence" become the "primary residence" ?


How is "Résidence Principale" defined in France?


According to le Bulletin officiel des finances publiques (Bofip), the basis for determining whether it is the main residence is to look at the frequency of living in a certain residence, as well as social relationship bonds (partners, children), etc. By principal residence, it means that you have lived here most of the time (with your family, or alone) in the past (for a period of time specified by law). If you buy a property that you do not live in, but vacate, or rent to someone else, the property is not your primary residence and is not tax-exempt. On the contrary, even if it is a rented house, if you live here on a daily basis, it is considered your main residence.


When an investor buys a property that is not their primary residence, how can they be sold without paying tax? It is recommended that you move in before the sale (one year), and keep relevant proofs of living here, such as daily utility bills, etc. According to the July 2 this year, in the Bordeaux administrative litigation court la Cour administrative d'appel (CAA) de Bordeaux in a case concerning "whether it is the main residence", the judge used the daily consumption of hydroelectric energy as the determination of the residence. Whether it is one of the basis for primary residence.

03/ What should I do if there is no residence certificate during the sales period of the main residence real estate  


When the property is originally your main residence, but for some reason (such as going to work abroad, or returning to the country for development), you decide to sell the property, and you will not continue to live in your main residence, and you cannot continue to provide water and electricity bills to prove that this is your main residence. How to do? Typically, there is a one-year normal sale period Durée normale pour la vente for houses to sell, during which time the property can be sold without paying VAT.


In the face of the COVID-19 epidemic this year, the three-month ban on housing transactions in the first half of the year led to a stagnation of housing transactions, but from the perspective of housing prices, the entire market has not been greatly affected. However, after the lifting of the ban, the speed of real estate sales in some areas outside Paris has been slightly affected. The real estate that was easier to sell may not have found a suitable buyer for more than a year. Wouldn't it be a waste of time to enjoy the tax-free policy? Don't panic, the French Administrative Court (Le Conseil d'Etat) has relaxed the normal sales period for houses in response to such black swan events and the overall assessment of the economic situation. Taking this year's situation as an example, the normal real estate sales period has been extended from 12 months to 22 months. However, during this period, the property cannot be lived in or rented out, nor can it be lent to anyone for free.


However, although there is a leniency in the policy, it also reminds us when purchasing real estate: high-quality housing, convenient transportation around, and complete resources in all aspects of education and life will greatly improve the liquidity of real estate. When the real estate is in a hurry to sell, it will not be apprehensive due to external factors.

bottom of page