What tax applies when renovating a home?

Will you be liable for tax on the renovation of your home? Are you planning work to give your property a fresh new look? Find out which VAT rate will apply, as it may be either 6% or 21%. This could help you avoid paying a substantial tax on your home renovation.

What are the conditions for benefiting from the reduced rate of 6%?

• At least ten years old: the property undergoing the work must be at least ten years old.
• Mainly for private use: the property must be used mainly for private purposes, meaning more than 50%. If you have a mixed-use property, VAT remains at 21% for work relating to the part used for professional purposes.
• A limited extension: if you are planning to extend your home, the floor area of the existing part must be at least equal to half the property's total floor area after the extension work. Pay close attention to this condition because, if it is not met, the entire conversion will be subject to VAT at 21%.

Please note that the VAT authorities intend to tighten their checks on these conditions. To do so, they send a letter to anyone who has submitted a planning permission application for a renovation, asking which rate the work is being invoiced at and requesting that plans for the project be enclosed. 
Do not forget to respond to this request, even if you are certain that you meet the conditions for the 6% rate. Otherwise, you could face a fine of 1000€, as well as a possible additional penalty of 5% to 10% when the matter is subsequently regularised.

 

If you would like information about loans granted for renovation work, we recommend reading our article dedicated to this subject.