Since the 1960’s the French government has proactively supported the tourism market throughout France, which is a major part of the French economy. After all, France is the most visited country in the world.
In addition to making the process of buying a property in France very secure for both buyers and sellers, far more secure than many other countries around the world, the French government also actively encourages investment into French real estate through tax rebates.
For French residents, every year the government typically announces a range of tax incentives and tax rebates for investing into French property. The Para-Hotelier Tax Scheme (Parahôtellerie) is one of the few tax incentives that is also available to non-residents. There are no restrictions in France on foreigners owning property.
The scheme is available for residential property only. For example a Villa on the French Riviera, a Chalet in the French Alps, or an Apartment in Paris.
Properties can be purchased either in individual names (single or joint) or via a company.
The tax incentives available via Para-Hotelier (Parahôtellerie) apply to new build properties, but can then be passed on to subsequent owners.
What are the Tax Incentives of Para-Hotelier?
- VAT Rebate of 20%
When buying a new property, the price includes VAT at 20%. Under the Para-Hotelier Tax Scheme, this 20% VAT is rebated back to the owner as a lump sum, on condition that the property is rented to short term holiday makers (less than 30 days at a time), for at least 20 years. If the owner decides to stop renting the property, then the VAT is repaid back to the French government on a pro-rata basis. e.g. If the property is rented for only 10 years, then the owner would repay half the VAT. If the property were sold, as long as the new owner is happy to continue renting the property, the VAT would not need to be repaid. - No French Income Tax on the Rental Income
Owners are allowed to offset 80% of the purchase price of the property as Depreciation over 20 to 30 years. The owners, and their accountants, can decide what rate of depreciation to use, taking into account other expenses like mortgage interest, to ensure that there is no French Income Tax to pay.
If you own the property in your own name, and live outside of France, then you will most likely need to still declare the rental income in your country. In the UK, this type of rental income (i.e. short term holiday lets) is still very tax efficient, as HMRC will allow you to offset all expenses against the rental income. In contrast to a long term buy to let property, where UK residents can no longer offset all the mortgage interest.
What conditions must be met?
In order to benefit from these generous tax breaks, as the owner you will need to provide at least 3 out of 4 services from the list below. Essentially to provide a very comfortable experience, on par with an upmarket hotel. These services are:
- Concierge Service, or at least ensure that someone is available to meet the guests and give them the key.
- Cleaning Service.
- Breakfast.
- Provide linen and towels.
Worldwide Property Company is able to introduce you experienced letting agents who can provide the above services, and to a number of French Accountants who are familiar with Para-Hotelier, for further advice.
* Para-Hotelier is not the same as LMNP, which is better known as French Leaseback. A French Leaseback is a commercial property, i.e. a hotel room, student accommodation or retirement home. Para-Hotelier applies to individual residential properties.
