French Alpine Property Purchase Not Taxing

Overseas property investors interested in French Alpine Skiing Property can benefit from an excellent tax break on their purchase.

France normally imposes a 20 per cent value-added tax on property purchases, but the tax break refunds it to buyers of newly built properties who are willing to rent them to vacationers. It also slashes the normal 7 per cent transfer tax to 2 per cent.

Although the tax rebate is available across France, it is mostly used for French Alpine property because it is aimed at supporting the tourism industry by encouraging owners to make more beds available.

Knight Frank and the property consultancy Athena Advisers both say the tax break has become a factor for 80 percent of their customers buying French Alpine property, with Athena estimating that it has saved its customers almost 15 million euros in VAT.

The tax break has tight conditions and is restricted to new developments and completed projects less than five years old. But rebates range into the millions of euros.

A French Alpine apartment marketed at €600,000, or about $658,000, will normally include €100,000 of VAT on top of a base price of €500,000, so the rebate would equal a sixth of the normal sale price.

Roddy Aris, Knight Frank’s head of sales in the French Alps, said the biggest change in the Alps over the past decade has been a sharp rise in the number of owners renting out their properties. The typical chalet buyer is open to renting to tourists because the owners themselves usually plan to stay there for only a few weeks a year.

‘Some retirees might spend three months there, but that is rare,’ Mr. Aris added, ‘so it is a no-brainer to make some income by renting the place out when it would otherwise be empty, especially when that qualifies you for a large VAT rebate in the first place.’

The tax breaks can also be granted to existing buildings if they go through extensive renovations. An example is Vail Lodge, being sold through Cimalpes in the Legettaz area of Val d’Isère, where two- to five-bedroom apartments are priced from €1.7 million to €4.9 million, meaning VAT rebates of about €280,000 to €810,000.

To qualify for the rebate, a buyer has to commit to making the French Alpine property available for short-term rentals for 20 years.

If they change their minds at any stage and convert property to purely private use, a portion of the VAT rebate must be repaid, depending on how much of the 20-year period is left. After 10 years, for instance, half the rebate would have to be repaid.

When a property that has received the VAT rebate is resold, the rebate will generally be factored into the price, as the new owner takes on the responsibility of repaying some of the rebate if the property is converted to fully private use during the original 20-year period.

To qualify for the rebate, a French Alpine property must be offered for rent with services that a long-distance landlord could not provide without a local manager.

It must have three of the following four services: a check-in reception, an on-site or nearby breakfast service, the provision and cleaning of linen and room cleaning at least three times a week.

Austria also offers VAT rebates, but only on properties in managed apartment-hotels.