Do I Need to Charge VAT on Rental Income in France?
Originally posted on & updated on 11th January, 2024
If you wish to recover the VAT on acquisition, construction, reconstruction and improvement costs, you must charge VAT on rents and the sale of the real estate.
In principle, a rental business provides a ‘service’ and, as such, must be subject to VAT. But this principle does not apply to all property rentals: some are expressly subject to VAT and others are exempt.
Rental Income of a Residential Property
The rental of residential properties, whether furnished or unfurnished, is generally exempt from VAT in France. Landlords cannot elect to charge VAT voluntarily.
However, the following categories of letting are not exempt:
- Hotels and equivalents
- Furnished accommodation where the landlord offers, in addition to accommodation, three out of the following four services: breakfast, regular cleaning, laundry services, and a reception area; This provision applies to B&B and French gîtes
- Specific tourism rentals
- Accommodation provided under a commercial lease
If subject to VAT, VAT is not payable where a rental business’ turnover is below the VAT threshold (generally €91,900 for rentals), although quarterly returns may still be required. The standard rate of VAT in France is 20%, learn more about the French VAT rates and system.
VAT on Rented Commercial Properties
VAT applies on the rental of furnished professional premises. When the business’ turnover is below the VAT threshold, the landlord can charge VAT.
On the other hand, the rental of unfurnished professional premises is generally exempt. However, the landlord may opt to charge VAT.
Rental Income on Rural & Farm Properties
Leases involving agricultural lands, farm properties or buildings are typically exempt from VAT. However, if the tenant is a VAT-liable farmer, the landlord may opt to charge VAT.
For Expert French Tax & VAT Advice
Our UK-based legal partners specialise in taxation, rental property acquisition, succession, wealth tax and more. For expert advice to help you navigate through the web of tax regulations in France, please contact François Mouniélou or Romane Giet at RWK Goodman in London.