When the Knight Frank Agency analyzed the main drivers of the French Alps property purchase in 2019, one of the factor factors was the traditional greed of the bears and the surge of summer activities in the mountains.
“It’s not exactly glamorous, but the biggest driver right now for choosing an easy French resort somewhere else is a very nice tax break,” says Rhody Aris, sales head of the agency in the French Alps.
France typically imposes a 20 percent value added tax on property purchases, but the tax break returns it to buyers of newly created properties who are willing to rent their retirees. This reduces the general 7 percent transfer tax to 2 percent.
Mr Aris said the tax exemption is available throughout France but it is mostly used in the Alps as it is intended to support the tourism industry by encouraging owners to make more beds available.
“The whole idea is to increase the number of ‘warm beds’ that tourists can use, such as ‘cool beds,’ which are locked behind shutters and not good for anyone.
“The more warm beds and tourists there are, the more affection is being sold, more beer is poured, and more ski passes and ski lessons are being used.”
Knight Frank and property counseling Athena’s advisor While both say that tax breaks have been a factor for 5 percent of their customers in the French Alps, Athena estimates it has saved about 1 million euros in VAT on its customers.
Tax breaks have strict conditions and are limited to projects less than five years old and new ones. But the discount is in the millions of euros.
An apartment sold for $ 1, or about $ 5, will usually include VAT € 5,1,900 at the top of the $ 5 base price, so the discount is equal to six percent of the normal sale price.
“This kind of exemption made the argument for me,” said Gary M., a Singapore-based corporate lawyer who doesn’t want to use his full name to discuss tax issues.
A British citizen, Gary first considered buying a ski chalet in northern Japan or a Swiss resort before learning about the French tax break, which he called a real game-changer.
“It made all the difference for me and put the French Alps in front,” he said.
Gary, who is in his early forties, is looking for a property that will “wash his face” with rent income before becoming an option to retire in 15 to 20 years.
He says that he saw it in Niseko, Japan, “but the price went up there on the roof.”
“Although the Alps is more expensive than some places, it is more of a blue-chip type investment in future income and property growth.”
“To be honest, I kept my mind a little more traditional, like an old cottage or a very charming farmhouse,” but then I was told to pay the VAT rebate for new-builds and I suppose if you didn’t live in the new complex. More practical with keeping low.
Gary Weing heard of the tax breaks in Paris, the agency through which he had already bought property in Paris. He is now considering an apartment developed by the firm’s Maribel, two hours away from Lyon and Geneva.
The Global Alpine is the new development The price will include 95 one-to-three-bedroom apartments ranging from around € 400,000 to $ 1.5 million, after deducting a VAT exemption of around $ 4,000 to $ 2 million.
Mr Aris of Knight Frank says the biggest change in the Alps over the last decade has been the sharp increase in the number of renters owning their properties. Usually chalet buyers are open to hiring tourists because the owners themselves usually plan to stay there for a few weeks a year.
“Some retirees can spend up to three months there, but it’s rare,” Mr Aris added, “so earning a bit of rent while the place is otherwise vacant is no brainer, especially when it makes you eligible for a big VAT in the first place. Discount “
An apartment in Les Glacier, a 11 Wooden Cottage Development He said he would get a tax deduction of about $ 800,000 for Knight Frank marketed by the Kouchel Marionade.
Four to seven bedroom slates will be finished by the end of 2021 with private parking and balcony and a shared swimming pool. Their prices range from about $ 2.5 million to $ 4.7 million, with VAT savings around $ 410,000 to $ 80 780,000.
Tax breaks can also be offered if existing buildings undergo extensive renovations. An example is Val Lodge, which is being sold through Simalpes in the Legatez area of Val D’Sier where two to five-bedroom apartments are priced from € 1.7 million to € 4.9 million, meaning VAT exemption of about $ 280,000 to $ 810,000.
To qualify for a discount, a buyer must be committed to providing short-term rentals for 20 years.
Mr Arias said that the concessions that an apartment owner receives “should technically be rented whenever they want to use the apartment.”
If they change their mind at some point and convert the property to purely private use, a portion of the VAT exemption must be paid depending on how much of the 20-year period is left for example, after 10 years, half the exemption must be paid.
When a property that is VAT rebate is resold, the discount is usually identified as a price, Mr. Arias said, adding that if the property is fully converted to personal use, the new owner will be responsible for taking some of the discount over the original 20-year period.
Knight Frank has managed to hire local partners to hire suitable properties for rent picks, while Simalpes has served as a “one stop shop” for clients in the Three Valleys area.
London-based financial services manager Giles Dee, who was reluctant to use his full name, said he got the discount when he bought a three-bedroom apartment in Val-de-Isir in February last year, but warned that he “manages all the rebate paper works. Without an agent to do it, he could never do it. “
“It’s really complicated, and if I had bought a lot of property in the US before, this French bureaucracy would certainly have been superior to me,” he said.
“The amount of paperwork in France is unbelievable, and you have to make sure you meet all the conditions of the concession project and not break it in the future,” he said.
Giles bought through Athena Advisors, which he said he contacted people in the legal services for mortgages, insurance, a French bank and managing rentals.
“They all did,” he said. “My advice to everyone doing this is: Get people to help you through the process, because it’s so complicated.”
To qualify for a discount, a company must offer to rent with services that a remote landlord cannot provide without a local manager.
It should include three of the following four services: a check-in reception, a site or nearby breakfast service, linen arrangements and cleaning and cleaning the house at least three times a week.
Giles’ second tip for users of VAT tax breaks is to be aware that after filing a French tax return, they must pay their initial VAT payment before filing.
“In my case, it only took seven months to get the money back, so it was OK, but people should understand that they have to put this money in the first place,” he said.
Athena Advisors spokeswoman Lloyd Hughes said that until recently the VAT exemption was only used by developers to create “residences de tourism” that were generally at the bottom end of the market and were often offered through regulatory rental management contracts. Owners are guaranteed yields per year and several weeks of personal use.
“Middle and high-end buyers are getting involved now, and our average selling price in the French Alps is € 1.4 million,” he said.
Seven bedrooms Chalet le Rocher For example, Val-d’Isère sells $ 17 million through Athena, meaning a $ 83.23 million VAT rebate.
In Maribel, Antares 1707 Hotel The two-to-eight-bedroom apart যা apartment is being transformed from $ 2.5 million to € 1.5 million, with VAT offset from $ 352,000 to $ 1.6 million.
Austria also offers VAT discounts, but only on the properties of managed apartment-hotels.
Gilles Gale, managing director of Alpine Property Finders, says these national apartments are part of the hotel when the owners don’t use them and earn up to three percent of their annual purchase price.
“Buying a hotel-development hotel may seem limited, but they are much more hassle-free in terms of maintenance and owners should never have to worry about changing linens and washing towels,” he said.
Mr Gale said, “Owners have access to hotel development as well as hotel guests at pool and other development services like spas.” We found that 3 percent of our clients are happy to rent their property when they are not using it. “
“For example, if you’re looking for a school holiday, you’re going to plan your skiing six months to a year in advance.”