Assetz® News » HOME | RSS Feed FEED | LIST ALL ARTICLES | ASSETZ HOMEPAGE
Investment Property News from Assetz

Assetz® Property News Service

New French property law may attract more investors


6th March 2007 | back to article listings BACK    print this article PRINT

Following a recent report from International Living that France enjoys the best quality of life in the world, there is another piece of news that may interest buy-to-let investors that are currently thinking Gallic. A new law enacted last year, and subject to several recent revisions, has served to make things somewhat easier for the investor who leases their freehold property to a management company.

Under the so-called 'leaseback' scheme, foreign investors are able to purchase a freehold property and let it to an approved management company for a fixed term of between nine and eleven years. As part of the arrangement, the company agrees to pay a fixed rental for the property, even when it is not being used. This means the investor can bank on a guaranteed income for the property and make appropriate forecasts. Of course, the terms of the deal are likely to mean that the rental income the management company pays the owner during peak season will probably be considerably less than the price that they could get on the open market, but this is offset against continued regular income during the off-season.

Previously, investors taking advantage of the leaseback scheme did not have to pay VAT - 19.6 per cent - on the purchase price of the property earnings, unless they sold the freehold inside the duration of the agreed leaseback term. At that point, a proportion of the VAT, known in France as TVA, would be payable to the government. The proportion was calculated by deducting the number of years the agreement had been in operation for from 20.

A nine year lease would mean that, once it had run its course, the owner would pay 11/20 of the VAT on the original purchase price. With inflation over those nine years, the proportion payable would likely not be a significant sum. If the owner of the property engaged in leasehold for 20 years, there would be no VAT payable on expiry of the lease.

Under the new legislation, selling the freehold does not attract any VAT repayments at all, even if the transaction takes place in the first few years of the leaseback agreement, which would previously have attracted a 100 per cent VAT payment to the government. This makes a relatively simple scheme even less confusing and may well serve to attract more investors to the French market. However, It is important to be aware that this arrangement applies only to new build properties. The investor who purchases a refurbished property or in a regeneration area will probably not be able to take advantage of the scheme.

As an added bonus, although the terms of leasehold agreements will vary between companies, most will allow for the owner to use the property as a holiday home for a certain number of weeks each year. During such time, the property will continue to be cleaned and serviced as it would normally be for a paying holidaymaker, meaning the investor can look forward to several weeks of ease each year plus a guaranteed rental income.


Assetz® is a UK Property Investment Specialist. Please visit our property sites shown below.

Assetz for Investors UK Assetz Finance

Accessing the news service

You can view all of the Assetz® UK Property Investment Articles and News here.

We also provide an RSS Feed Feed of the news service, or you can view all articles. Click here to view more information on RSS readers and how they make reading online news more convenient.

Cookies on our sites
The assetz.co.uk group of websites uses cookies, some of which may have been set already. Read about our cookie use. If you continue to use the site, we'll assume that you're happy to accept them. To dismiss this message please click the button.