PILLAR — REAL-ESTATE TAXATION Real-estate VAT
Real-estate taxation — VAT

Real-estate VAT

A tax law firm in Paris, we advise property companies, developers, property dealers, hotel operators, family offices and individuals on the full range of real-estate VAT issues: scope, tax regimes, exemptions and elections, right to deduct, supplies of buildings, commercial leases, VAT margin scheme, notarial mentions, and defence during tax audits. The firm is recognised as having a "Strong reputation" by Décideurs / Leaders League in VAT and real-estate taxation.

Contact a VAT lawyer The lead counsel
Paris · Geneva · Marseille · Cannes · Lisbon
— 01

Our approach to real-estate VAT

Real-estate VAT is one of the most litigious areas of French tax law. The line between a new building and an existing building, between a self-supply and mere works, between VAT on the full price and the VAT margin scheme determines the applicable regime, the taxable base and deductibility. An error of characterisation can lead to a VAT reassessment, late-payment interest and, where applicable, penalties.

Our approach: structure matters in advance (choice of regime, drafting of clauses, election to charge VAT), secure complex transactions (VEFA, BEFA, land sales, demolitions, eviction indemnities, key money) and defend in the event of litigation before the tax authorities and the administrative courts.

The firm is regularly consulted by listed and unlisted property companies, developers, property dealers, hotel operators and para-hotel operators, as well as by partner notaries on deeds requiring a detailed VAT analysis.

— 02

The 9 pillars of real-estate VAT

01

1. Scope of VAT

A real-estate transaction is subject to VAT where it constitutes a supply of goods or a supply of services made for consideration by a taxable person acting as such (Tax Code art. 256).

  • An extension of Directive 2006/112/EC on the common system of VAT within the EU.
  • The notion of taxable person: economic activity, organisation, regularity — covering property dealers, developers and individuals actively marketing property.
  • The active-steps criterion established by the CJEU (cases C-180/10 and C-181/10 Słaby) and taken up by the Conseil d'État (CE, 9 Nov. 2015, no. 384682).
  • A body of indicators: advertising, servicing of land, division into lots, coordination of contributors — a matter regularly disputed during tax audits.
02

2. Tax regimes

Depending on the nature of the property (new / existing) and its identification (built property / building land), the transaction falls under VAT on the full price, the VAT margin scheme, or an exemption.

  • VAT on the full price — the ordinary regime for a taxable person.
  • VAT margin scheme (Tax Code art. 268) — only on the difference between the sale price and the purchase price, subject to conditions.
  • Exemption as of right for the transfer of existing buildings (unless an election is made).
  • Determination depends on the characteristics of the building, the identity of the purchaser and the future use of the property.
  • Sources: Tax Code art. 257, 260 and BOI-TVA-IMM-10-10.
03

3. Exemptions & favourable regimes

Some transactions are exempt as of right (bare letting, transfer of existing buildings), with an option to elect for taxation in the professional sector, in order to benefit from the right to deduct.

  • Bare letting of professional premises — election possible (Tax Code art. 260 2°).
  • Transfer of an existing building — election to charge VAT (Tax Code art. 260 5° bis).
  • A trade-off to assess: the exemption may trigger alternative registration duties.
  • Case-by-case analysis, depending on the profile of the parties and the transaction envisaged.
04

4. Supply of a building & VAT

Any supply of a new building is taxable to VAT — completed less than 5 years ago, or carried out by a building taxable person (developer sale, first transfer, heavy restructuring).

  • Sale by a developer, first transfer for consideration, resale after heavy restructuring.
  • Whether the works are "substantial" enough to characterise a building as new is a question of fact (technical analysis).
  • Terms set out in BOI-TVA-IMM-10-20-10.
  • See our case note on the Conseil d'État ruling of 12 November 2025 on the para-hotel regime.
05

5. VAT and real-estate letting

Bare letting is in principle exempt from VAT — with an election possible for professional premises where the tenant is a taxable person, allowing the recovery of VAT on works and expenses.

  • The election is irrevocable for a minimum of 10 years.
  • It avoids registration duties of 5.80% on the transfer of a lease right or of an occupied building.
  • Particularly useful for landlords carrying out substantial renovation or fitting-out works.
  • See our article on the para-hotel regime following the CE ruling of 12 Nov. 2025.
06

6. VAT margin scheme

A specific regime allowing taxation not of the full price, but only of the margin realised on the resale of a building (Tax Code art. 268).

  • Cumulative conditions: the property is not new, was acquired without any VAT deduction, and is resold in its existing state.
  • Strict legal identity — required by recent case law.
  • CE 27 March 2020 no. 428234 (Promialp) — partial demolition rules out the margin scheme.
  • CE 11 October 2022 no. 464561 — division of land parcels and conditions of application.
  • Rigorous documentation is essential.
07

7. Mandatory mentions & invoicing

In real-estate VAT, the mention obligations do not concern only ordinary invoicing: they also apply to the notarial deeds that record taxed sales or transfers of buildings.

  • Applicable VAT regime — VAT on the full price or VAT margin scheme.
  • Legal basis — Tax Code art. 257 (new buildings) or art. 268 (margin).
  • Characterisation of the transaction (supply, transfer of rights, etc.) and the capacity of the parties (taxable person / non-taxable person).
  • Taxable base and applicable rate.
  • Mention of the election made, where applicable.
08

8. Right to deduct & coefficients

A fundamental principle of the VAT system (art. 168 of Directive 2006/112/EC and Tax Code art. 271) — recovery of the tax borne on purchases used for transactions giving rise to a right to deduct. Conditions: a compliant invoice, allocation to a taxable activity, intended economic use.

  • Immediate deduction, subject to a compliant invoice (Tax Code art. 289) and to the allocation of the goods or service to a taxable activity.
  • The intention of economic use is sufficient even if the downstream transaction does not proceed — CJEU 29 February 1996, C-110/94 (INZO) and CJEU 15 January 1998, C-37/95 (Ghent Coal Terminal).
  • The system of three coefficients (subjection, taxation, admission) to be calculated line by line — Tax Code annex II art. 206, BOI-TVA-DED-20-10.
  • Adjustment over 20 years for buildings (annex II art. 207) — change of allocation, transfer during the period, modification of the admission coefficient.
  • Deduction pro-rata, separate sectorisation, VAT group (Tax Code art. 256 C, since 2023) — steering tools for structures with mixed activity (property companies letting to taxable and non-taxable persons, mixed holdings).
  • BOI-TVA-DED-10 to BOI-TVA-DED-60 — exhaustive BOFIP doctrine on the conditions, exercise and adjustment of the right to deduct.
  • Frequent litigation on the proof of allocation and on so-called holding operations (involvement in the management of subsidiaries conditioning deductibility — CJEU Larentia + Minerva, C-108/14 and C-109/14).
09

9. Tax audit & litigation

Sales or lettings of buildings are frequently the subject of audits. The tax authorities examine the characterisation (taxable person, new building, election) and may reclassify the transaction with a reassessment, penalties and interest.

  • Challenging or negotiating during the reassessment proposals.
  • Possible litigation on the existence of a professional activity, the availability of an election, or the reclassification of the building.
  • Representation before the administrative court, the administrative court of appeal and the Conseil d'État.
  • Prior securing and support with voluntary regularisation to limit penalties.
— 04

Lead counsel — François Ouairy

Partner in charge of the Paris office, specialising in VAT, real-estate taxation and wealth taxation. Best Lawyers 2026 in Tax Law, strong reputation with Leaders League in VAT, with a dedicated real-estate tax practice. Author of leading articles in Defrénois (for notaries) and Lextenso on the undertaking to resell, active land-marketing steps and wealth disposals by VAT-taxable persons.

  • Best Lawyers 2026 — Tax Law
  • Leaders League — VAT
  • Real-estate VAT
  • Undertaking to resell
  • Heavy restructuring
  • Defrénois & Lextenso
— 03

Recent publications

A selection of the firm's articles relating to real-estate VAT, the characterisation of transactions and defence in litigation.

VAT · Para-hotel

VAT and furnished lettings: the CE ruling of 12 November 2025

A major decision tightening the para-hotel regime: practical consequences for furnished-rental landlords, tourism operators and the deductibility of input VAT.

November 2025 Lire l'article VAT · Construction

Clarifications on the notion of construction works for VAT

The boundary between construction works and supply of goods, its consequences for the applicable rate, the reverse charge and deduction. Practical reading for construction firms and project owners.

August 2024 Lire l'article VAT · BOFIP

Para-hotel VAT — BOFIP update

A commented reading of the administrative doctrine on para-hotel activity: the criteria for para-hotel services and their consequences for VAT characterisation.

August 2024 Lire l'article Property dealer

Property-dealer notary fees

Interaction between the undertaking to resell and the undertaking to build, reduced duties and litigation — operational guidance.

August 2024 Lire l'article VAT · Time limits

The appeal time limit on refusals to refund VAT credits

The CE ruling of 14 Nov. 2025 (Penn Ar Bed) clarifies the one-year time limit applicable to refusals to refund VAT credits, even without notification of the available remedies.

December 2025 Lire l'article
— 05

Frequently asked questions

What is the VAT regime for the sale of a building in France?

A sale of a new building (completed less than 5 years ago) by a taxable person is subject to VAT on the full price. A sale of an existing building is in principle exempt, with a possible election to charge VAT (on the full price or on the margin depending on the situation). Sales of building land follow a specific regime. The characterisation — new, existing, building land — and the seller's status determine the applicable regime.

When is a building considered "new" for VAT purposes?

A building is new for VAT purposes when it has been completed less than 5 years ago, or when it results from a heavy restructuring equivalent to a reconstruction. Whether the works are substantial is a question of fact: modification of the load-bearing elements (foundations, façades, floors, framework) or of the make-up of the premises. BOI-TVA-IMM-10-20-10 and the case law of the Conseil d'État set out the criteria.

What is the VAT margin scheme and when does it apply?

The VAT margin scheme (Tax Code art. 268) applies only to the difference between the sale price and the purchase price, subject to three cumulative conditions: (1) the property is not new, (2) it was acquired without any VAT deduction (from an individual or under the margin scheme), (3) it is resold in its existing state. Recent case law (CE 27 March 2020 Promialp; CE 11 Oct. 2022 no. 464561) requires a strict analysis of the legal identity of the property — demolitions or division of land parcels rule out the regime.

Can the bare letting of a building be subject to VAT?

Not as of right. The bare letting of a building is in principle exempt from VAT. The landlord may nonetheless elect to charge VAT (Tax Code art. 260 2°) on bare premises used for professional purposes. The election is irrevocable for a minimum of 10 years, but allows the landlord to recover the VAT on the works and charges relating to the property — useful for landlords carrying out substantial renovation works.

What are the VAT rates applicable in real-estate matters?

The standard rate is 20% (sales of new buildings, letting with an election, standard services). The intermediate rate of 10% applies in particular to improvement, conversion and maintenance works in dwellings completed more than 2 years ago. The reduced rate of 5.5% covers certain energy-improvement works. The characterisation of the rate is regularly disputed during audits — BOI-TVA-LIQ sets out the criteria.

How does the right to deduct VAT work in real-estate matters?

The right to deduct (Tax Code art. 271, Directive 2006/112/EC art. 168) allows the taxable person to recover the VAT borne on purchases used for transactions giving rise to a right to deduct. Three coefficients must be calculated: subjection, taxation, admission (annex II art. 206). For buildings, the adjustment takes place over 20 years (annex II art. 207). A mixed allocation or a change of use triggers an adjustment.

What should be done in the event of a VAT audit on a real-estate transaction?

Three steps: (1) analyse the reassessment proposal to identify the points open to challenge — characterisation of the building, taxable-person status, conditions of the election, rate applied; (2) respond within the 30-day period (extendable to 60 days) with precise factual and legal elements; (3) if the position is maintained, refer the matter to the departmental interlocutor, then to the departmental tax commission, and where applicable to the administrative court. Early support very significantly limits the financial risk.

Cité par

A real-estate transaction to structure or VAT litigation to secure?

A confidential first exchange, without commitment. We reply within 48 business hours.

Request a consultation Meet the lead counsel
Jonathan Bensaid, avocat fondateur

Written by

Me Jonathan Bensaid, avocat fiscaliste, fondateur du cabinet Bensaid Avocats, inscrit aux Barreaux de Paris & Genève.

© BENSAID Avocats — The information on this site does not constitute legal advice. Sources: Tax Code art. 256, 256 A (scope), 256 C (VAT group), 257 (new buildings), 260 2° & 5° bis (elections), 268 (VAT margin scheme), 271, 273 (right to deduct), 289 (compliant invoice); Tax Code annex II art. 206-207 (coefficients & 20-year adjustment); EU Directive 2006/112/EC; BOI-TVA-IMM; BOI-TVA-DED-10 to 60; CE 9 Nov. 2015 no. 384682 (active steps); CJEU C-180/10 and C-181/10 Słaby; CJEU 29 Feb. 1996 C-110/94 INZO; CJEU C-108/14 and C-109/14 Larentia + Minerva; CE 27 March 2020 no. 428234 (Promialp); CE 11 October 2022 no. 464561. Editorial update: May 2026.