Real estate VAT - Reduced rate and social housing - Tax ruling - 06/09/2021

Question:

A taxpayer plans to acquire, as part of a homeownership operation, a property located in a priority neighborhood of the city’s policy. He wishes to benefit from the reduced rate of value-added tax (VAT) for this operation, in accordance with Article 278 sexies of the General Tax Code (CGI), and is wondering about the dates to consider for assessing income conditions and household composition.

Answer:

Paragraphs a) and b) of point 2° of III of Article 278 sexies of the CGI provide that value-added tax (VAT) is levied at the reduced rate of 5.5% for the delivery of buildings located in certain neighborhoods, subject to meeting income conditions and allocating the building for use as a principal residence.

Regarding income conditions, compliance is assessed on the date of signing the preliminary contract or the preliminary contract or, failing that, on the date of the sales contract or the contract for the construction of the housing (BOI-TVA-IMM-20-20-20).

Furthermore, the methods for determining the amount of income to be taken into account during a given year are set out in Article 4 of the decree of July 29, 1987, concerning income ceilings for beneficiaries of the legislation on low-rent housing and new state aid in the rental sector. This amount corresponds in principle to the sum of the income constituting the taxable income (set out in I of Article 1417 of the CGI) appearing on the tax notices of each person composing the household, established for the penultimate year preceding that of the signing of the preliminary contract or the preliminary contract or, failing that, the sales contract or the contract for the construction of the housing.

However, under the last paragraph of Article 4 of the decree of July 29, 1987, the requesting household can request that its taxable income for the last calendar year preceding the one in which the contract was signed or its taxable income for the twelve months preceding the date of signing of the contract be taken into account, provided that it proves that this income is at least 10% lower than the income mentioned in the previous paragraph (i.e., the income of the penultimate year mentioned above).

Finally, it is emphasized that the income ceilings, which are mentioned in BOI-BAREME-000016, are established according to the different categories of households defined in Article 2 of the decree of July 29, 1987, concerning income ceilings for beneficiaries of the legislation on low-rent housing and new state aid in the rental sector. To identify this category, it is necessary to assess the composition of the household on the day of signing the preliminary contract.