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The French Parliament has recently voted in favour of a reduced VAT at 5.5% for specific refurbishment related to energy efficiency and renewable energy on your property. However, the French Budget Ministry has recently pledged to widen the scope of reduced 5.5% VAT. More specifically, building works related to the improvement of energy efficiency will also benefit from the reduced 5.5% VAT rate, instead of an increased VAT from 7% to 10% as of January 1 2014. E.g. “What this means, for example, that in case of low insulation floor, demolition of existing tiles and the implementation of a new tiled floor will also be eligible for the reduced rate of 5.5%, ” declared the President of the French building Federation (FFB), Didier Ridoret after an interview with Bernard Cazeneuve the French Budget Minister. “This should re boost the work for improving energy performance”, confirmed Capeb (SME building works companies federation) President Patrick Liébus. “30% of all renovations are eligible to a reduced rate of 5.5%”.
So 2014 is a good year to undertake energy efficiency improvement in your French second home, beside, this is one of the very few incentive that a non resident can benefit from as most of other energy efficiency incentives require to be a French tax resident. This may not last in 2015. Energy efficiency is becoming a significant factor in the French property market (read our previous blog: “buying French property: energy performance becoming more important?”and “Energy performance the key factor for French new homes….”
refurbishment should be undertaken by qualified professionals:
If you buy and provide the materials to professional workers, the materials will be with a VAT at 19.6% (20% in 2014) only the refurbishment work will be at 5.5%. However, if the professional workers undertake the work with its own materials and equipment, the final invoice will be with a 5.5% VAT including the materials and equipment.
The professionals should deliver an attestation certifying that the work can benefit from the 5.5% reduced VAT. This attestation should be delivered before the works start.
Works should be completed in 2014 even if they were initiated in 2013. Caution should prevail as the first preliminary payments, if due in 2013, will bear a standard VAT rate, while the final invoice at the completion date in 2014 will be with a 5.5% VAT.
What type of refurbishment could benefit from the reduced 5.5% VAT:
Only the work for improving energy efficiency and for installation of specific renewable energy can benefit from the reduced VAT. In a nutshell, the implementation and related building works of energy efficiency installations listed in the CIDD* (“Credit d’Impot pour le Developpement Durable” or “tax credit for sustainable development”) will benefit from the reduced 5.5% VAT rate
Refurbishment for renovating (not related to improving energy performance), upgrading, or extending the property will be with a 19.9% VAT in 2013 and 20% VAT in 2014.
*The list of building work eligible for the CIDD can be found in (for 2013, in 2014 the list might be slightly amended), we may write a post in English if time constraint allows us to do so: