Key Points: VAT on French Property Sales
Two-step analysis. Step 1: is the seller a VAT taxable person (CGI Art. 256 A) acting as such within an economic activity? If not, the sale is outside the VAT scope entirely. Step 2: what type of property? Building land and new buildings (<5 years) are mandatorily VAT-taxable; old buildings and non-building land are VAT-exempt (but may be opted into VAT).
Private individuals are presumed non-taxable. The presumption is rebutted where the seller engages in active land commercialisation (sales office; guaranteed commissions; significant viabilisation works). Parcel division alone is insufficient. The administration uses a faisceau d’indices methodology (CE 9-6-2020, CAA Bordeaux 17-12-2021, CE 9-12-2022).
Where mandatory VAT applies on the full price (seller’s acquisition opened right to deduct), the buyer benefits from the reduced transfer duty of 0.71498%. Where VAT applies on the margin (CGI Art. 268), or on option, the buyer pays the standard 5.80665%. After CJUE 2021 (aff. 299/20), the margin rule requires upstream non-deductible VAT — not mere absence from VAT scope.
A taxable person who sells an old building or non-building land (VAT-exempt under CGI Art. 261, 5°) may opt (CGI Art. 260, 5° bis) to subject the transaction to VAT, typically to protect prior deductions. The buyer still pays the standard 5.80665% transfer duty even where the option is exercised.
From 31 December 2012 (Loi 2012-1510 Art. 64), private individual sales of VEFA contracts and buildings acquired as immeubles à construire within five years of completion are outside VAT scope. The livraison à soi-même (LASM) at 5.5% is the narrow exception for social housing self-construction in Anru/QPV areas.

The Analytical Framework: Two Questions

Determining the VAT treatment of a French property sale requires answering two questions in sequence. First: is the seller a VAT taxable person (assujetti) acting as such within the scope of an economic activity? If not, the sale is outside VAT entirely. Second, if the seller is a taxable person: what type of property is being sold? Building land and new buildings (completed within the past five years) are mandatorily subject to VAT. Old buildings and non-building land are VAT-exempt by law but may be opted into VAT.

Private individual seller
Outside VAT Scope
No VAT on any sale. Buyer pays standard transfer duty 5.80665%. Exception: social housing self-supply at 5.5% (narrow).
Taxable person — building land or new build (<5 yrs)
Mandatory VAT
VAT on full price if seller’s acquisition opened right to deduct (buyer: 0.71498%); or VAT on margin if not (buyer: 5.80665%).
Taxable person — old building (>5 yrs) / no option
VAT-Exempt by Law
CGI Art. 261, 5°. Exempt from VAT. Buyer pays standard transfer duty 5.80665%.
Taxable person — old building / non-building land / option
VAT on Option
CGI Art. 260, 5° bis. VAT applies. Buyer still pays standard 5.80665% (not the reduced rate — reserved for mandatory VAT only).

Who Is a VAT Taxable Person for Property Purposes?

Under CGI Art. 256 A, taxable persons are those who independently carry out an economic activity — any activity of producer, trader, service provider, including extractive, agricultural, and liberal profession activities — whatever their legal status. Property VAT applies only to taxable persons acting as such: the sale must fall within the scope of their economic activity, not be a patrimonial operation.

Private Individuals: Presumption of Non-Taxability

A private individual who sells land acquired by succession, donation, or for their private use is presumed not to be carrying out an economic activity. The fact that the individual previously carried out a parcel division, or the number of parcels sold, the duration of the sale programme, or the amount of receipts, do not on their own rebut this presumption (BOI-TVA-IMM-10-10-10-10 n° 60).

The presumption is rebutted when the seller engages in active land commercialisation by mobilising means placing them in competition with professionals: opening a sales office; paying guaranteed commissions; carrying out significant viabilisation works (particularly where viabilisation costs represent a major share of the sale price). The administration applies a faisceau d’indices methodology.

Key decisions:

  • CE 9-6-2020 n° 432596: significant viabilisation works exceeding 40% of the sale price and more than €30,000 per parcel → taxable person;
  • CAA Bordeaux 17-12-2021 n° 19BX03783: 41 lots resold within two years, viabilisation costs 30–39% per acquirer → taxable person;
  • CE 9-12-2022 n° 459206: permis d’aménager + infrastructure works (cycle paths, retention basin, adjacent parcel acquired) + sale to developer → taxable person;
  • CJUE 20-1-2021 aff. 655/19: acquisition through forced execution then resale → simple exercise of property rights; not an economic activity.

Persons Already Taxable on Other Activities

A person taxable on their main activity does not automatically sell property within the VAT scope. The test remains whether the sale is within the economic activity or is a patrimonial operation. The administration distinguishes:

  • Asset on the balance sheet (actif inscrit au bilan) → presumed economic operation;
  • Property become external to the economic activity → outside VAT scope (CE 29-12-1995 n° 118754).

An SCI acquiring building land to construct rental buildings acts as a taxable person even where some land proves unsuitable and must be sold, because that risk is inherent in the activity (CE 21-12-2022 n° 459476). Where a taxable person acquired land partly for private use, constructed a shopping centre on the whole, and sold everything, VAT applies to the private-use portion too (CJUE 9-7-2015 aff. 331/14).

Attribution Companies

Sociétés civiles d’attribution are treated as taxable persons when carrying out a property development activity financed by members’ contributions (from 1 January 2016, Décret 2015-1763). Shares in attribution companies follow the regime of the underlying property (CGI Art. 257, I-1-3°). The former marchand de biens status was abolished by the law of 9 March 2010; these operators are now subject to the ordinary taxable-person regime.

Transactions Within the Scope of VAT: What Is Taxable

Mandatorily Taxable: Building Land and New Buildings (CGI Art. 257)

Where the seller is a taxable person acting as such, two categories are mandatorily subject to VAT:

  • Building land (CGI Art. 257, I-2-1°: any land on which a construction can be authorised under a PLU, substitute document, carte communale, or national building rules in urbanised areas — independently of actual constructibility, seller’s intentions, or actual use);
  • Buildings completed less than five years ago (immeubles neufs), regardless of the number of transfers within that period.

These rules also cover assimilated rights: bare ownership, usufruct, undivided interests, promises of sale, and attribution company shares giving the right to ownership or enjoyment (CGI Art. 257, I-1 and I-2).

VAT Base: Full Price or Margin?

Where the seller’s own acquisition opened the right to deduct VAT, VAT is assessed on the full sale price. The buyer benefits from the reduced transfer duty of 0.71498%. Where the seller’s own acquisition did not open the right to deduct, VAT is assessed on the margin (CGI Art. 268), and the buyer pays the standard 5.80665%.

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The Margin Rule: Scope After CJUE 2021

Following CJUE 30-9-2021 aff. 299/20 and CE 12-5-2022 n° 416727, the margin rule applies only where the seller’s initial acquisition incorporated upstream VAT that was not recoverable. It does not apply where the initial acquisition simply fell outside the VAT scope or was VAT-exempt without any upstream VAT in the price. The rule also requires legal identity between the acquired and sold property: it does not apply where the seller demolished a built property to sell the land, or where non-constructible land became constructible between acquisition and sale. Physical modifications (division, utility network installation) between acquisition and resale are permissible without losing the margin regime.

VAT-Exempt by Law: Old Buildings and Non-Building Land (CGI Art. 261, 5°)

By a taxable person acting as such, the following are VAT-exempt by operation of law:

  • Sales of non-building land (agricultural, forestry, non-constructible land);
  • Sales of buildings completed more than five years ago.

The buyer pays the standard transfer duty of 5.80665% even though the seller is a taxable person.

The VAT Option for Exempt Transactions (CGI Art. 260, 5° bis)

A taxable person selling an old building or non-building land may opt transaction by transaction to subject the sale to VAT. Where the option is exercised, VAT applies (on the full price or on the margin depending on the deduction history). The buyer still pays the standard transfer duty of 5.80665% — not the reduced rate, which is reserved for mandatory VAT on full price.

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Why the VAT Option Matters for Old Buildings

A taxable person who acquired an old building subject to VAT on option (or renovated it with VAT-bearing costs) and now resells it more than five years after completion faces a choice: sell VAT-exempt (triggering a potential VAT adjustment clawback on prior acquisition or renovation costs) or sell with VAT on option, preserving the deduction chain. The option is typically exercised to protect prior VAT deductions. The decision has direct consequences for both parties: the buyer pays standard transfer duty either way, and the seller must consider the impact on the buyer’s own VAT recovery position.

Private-Individual Sellers: Outside the Scope of VAT

A private individual who is not a taxable person sells property entirely outside the scope of VAT. This covers: sales of any type of land; sales of new buildings acquired in their finished state, under VEFA, or under other construction contracts; and since 31 December 2012 (Loi 2012-1510 Art. 64), the sale within five years of completion of a building acquired as an immeuble à construire — formerly taxable, now outside scope. The same applies to assignment of a VEFA contract before completion, and to shares in attribution companies owning immeubles à construire sold within five years of completion.

The consequences are twofold: the private individual cannot deduct VAT previously borne on the property; and the buyer pays the standard 5.80665% transfer duty.

Livraison à Soi-Même: Social Housing Self-Supply

The only LASM scenario directly concerning private individuals (non-taxable persons) is the social housing self-supply under CGI Art. 257, I-3-2°: private individuals who construct a residential property for use as their principal residence within (or near) an Anru multi-year urban renovation convention area or a quartier prioritaire de la politique de la ville (QPV) covered by a contrat de ville, outside a standard construction contract, must declare a LASM subject to VAT at the reduced rate of 5.5%. This mechanism allows the individual to benefit from the 5.5% social housing rate, and the LASM authorises deduction of VAT borne on construction costs at the normal rate.

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Territorial Scope (CGI Art. 258, II)

Property VAT applies to sales of immovable property situated in France: metropolitan France (including Corsica), the Principality of Monaco, and the overseas departments — excluding French Guiana and Mayotte. The nationality or place of establishment of the parties, and the place of signing or paying, are irrelevant.

Complete VAT Matrix for French Property Transactions

Transaction type Seller type VAT treatment Transfer duty
Building land — seller’s acquisition opened right to deduct Taxable person acting as such Mandatory VAT — full price Reduced 0.71498%
Building land — seller’s acquisition did not open right to deduct Taxable person acting as such Mandatory VAT — margin (CGI Art. 268) Standard 5.80665%
New building (<5 years from completion) Taxable person acting as such Mandatory VAT — full price Reduced 0.71498%
Old building (>5 years) — no option Taxable person acting as such VAT-exempt (CGI Art. 261, 5°) Standard 5.80665%
Old building (>5 years) — option exercised Taxable person acting as such VAT on option (CGI Art. 260, 5° bis) Standard 5.80665%
Non-building land — no option Taxable person acting as such VAT-exempt (CGI Art. 261, 5°) Standard 5.80665%
Non-building land — option exercised Taxable person acting as such VAT on option (CGI Art. 260, 5° bis) Standard 5.80665%
Any property (land, new build, old building) Private individual (not taxable person) Outside VAT scope Standard 5.80665%
VEFA / construction contract assignment — before or after completion (from 31/12/2012) Private individual Outside VAT scope Standard 5.80665%
Social housing self-construction in Anru/QPV area (LASM) Private individual LASM at 5.5% (CGI Art. 257, I-3-2°) N/A (self-supply)
Summary: VAT Analysis Checklist for French Property Transactions
Step 1 — Classify the seller: is the seller a taxable person acting as such? For private individuals, is there evidence of active land commercialisation (viabilisation works, sales infrastructure, guaranteed commissions)? For companies, is the property on the balance sheet and within the scope of the economic activity?
Step 2 — Classify the property: is it building land (constructible under the PLU or equivalent)? Is it a new build (completed less than 5 years ago)? Or an old building/non-building land? The five-year date of completion is the critical threshold.
Step 3 — Determine the VAT base (full price or margin): for mandatory VAT, trace the VAT history of the current seller’s acquisition. Did it open the right to deduct? If yes: full-price VAT + reduced 0.71498% duty for the buyer. If no: analyse whether the margin rule applies (was there upstream non-deductible VAT?). Post-CJUE 2021, the margin rule requires upstream non-deductible VAT, not mere absence from the VAT scope.
Step 4 — Consider the VAT option for exempt transactions: where the seller is a taxable person selling an old building or non-building land (exempt), assess whether exercising the option (CGI Art. 260, 5° bis) is necessary to protect prior deductions. Note the consequences for the buyer (standard 5.80665% duty regardless; potential impact on the buyer’s own VAT recovery).
Step 5 — Transfer duty consequences: mandatory VAT on full price → reduced 0.71498%. All other scenarios (margin VAT; VAT on option; VAT-exempt; outside scope) → standard 5.80665%. The choice of VAT regime directly determines the buyer’s acquisition costs; model both scenarios before structuring the transaction.
Questions About VAT on French Property Transactions?

Our French law practice advises on taxable-person status analysis, building land definition, the VAT base determination (full price vs margin), the VAT option for old buildings, LASM for social housing, and the interaction between property VAT and transfer duties for complex French property transactions.

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Legal Notice. This article is provided for general information and educational purposes only. It does not constitute legal or tax advice. The TVA sur la marge rules reflect the CJUE positions (30-9-2021 aff. 299/20; ord. 10-2-2022 aff. 191/21) and CE positions (CE 12-5-2022 n° 416727; CE 27-3-2020 n° 428234). The non-taxability of private individual VEFA sales within 5 years of completion applies from 31 December 2012 (Loi 2012-1510 du 29-12-2012 Art. 64). This article covers the principles applicable to private investors; professional property developer regimes require separate analysis. Always consult a qualified French VAT specialist before any significant property transaction.