Practical guide
French property sale: who sells, what asset, which base, which duties. VAT option, margin scheme, article 257 bis, 2026 transfer duties of 6.32% or 0.715%, worked example.
No: when a building completed more than five years ago is sold, opting for VAT does not lower the buyer's transfer duties. They remain at the standard rate, around 6.32% of the price in most French departments in 2026. What sets both the real estate VAT and the duties is four questions asked in order: who sells, what asset, on which base, and what undertakings the buyer gives.
The opposite reasoning is common among sellers and in price negotiations. It looks logical: a new building sold with VAT bears only 0.715% in duties, so a sale "plus VAT" should reduce the costs.
It confuses two separate rules. The reduced rate follows the category of the asset and taxation on the full price, not the option.
This guide sets out the French VAT and transfer duty regimes in the order in which the decision is made, with the 2026 rates, the undertakings to resell and to build, a worked example and what the CIBS changes on 1 January 2027.
It explains the rules and their conditions; it does not replace the analysis of your transaction before the preliminary agreement is signed.
The regime of a property sale is read by crossing the status of the seller with the category of the asset.
For each category, the diagram below gives the VAT due on the sale, the adjustment left for the seller to bear, the duties paid by the buyer and the effect of an undertaking to resell or to build. Each point is explained in the rest of the guide.
French real estate VAT and transfer duties (droits de mutation à titre onéreux, "DMTO") are two separate taxes. The first is owed by the seller and invoiced to the buyer; the second is paid by the buyer when the deed is signed. They nevertheless follow the same reading grid.
Every sale is classified by answering four questions, always in the same order.
Each answer closes doors for the next one:
Starting with the tax base or the duty rate, as is often done in negotiations, leads to arrangements that cannot work.
The most frequent mistake is to treat VAT and duties separately. The notary calculates the duties, the accountant works out the VAT, and nobody compares the total cost of the two possible treatments.
Yet it is this comparison that sets the right price, as the worked example below shows, and it is the purpose of the diagram that opens this guide.
All supplies of immovable property fall within the scope of VAT when they are made for consideration by a taxable person acting as such (French Tax Code, Code général des impôts, hereafter "FTC", art. 256, II, 1° and art. 256 A; BOI-ENR-DMTOI-10-40, § 20).
The converse is absolute. A sale made outside any economic activity is never subject to VAT, and no option can bring it within the scope.
A developer, a property dealer, a property investment company or a trading company selling a building used in its business sells, in principle, as a taxable person. The sale falls within the scope, and the remaining question is whether it is taxed or exempt depending on the category of the asset.
For a non-trading company (société civile) or an individual, the answer is not automatic. It depends on the activity actually carried on and on the use of the asset sold. It is assessed asset by asset, and it should be documented before the preliminary agreement: articles of association, VAT registration, accounting treatment of the building, nature of the leases.
The sale of land by an individual is, in principle, part of the management of private assets. It is then outside the scope. The Court of Justice has nevertheless held that it becomes an economic activity where the seller takes active steps to market the land, using means comparable to those of a professional (CJEU, 15 Sept. 2011, joined cases C-180/10 and C-181/10, Słaby and Kuć).
The Conseil d'État applies the same test. The supply of building land by an individual is taxable where it results from servicing works, professional-type marketing means, or a development operation whose scale goes beyond the management of private assets (CE, 9 Dec. 2022, no. 459206, mentioned in the Lebon tables). The number of sales is not enough; the steps taken are what count.
In practice, the line runs between the owner who sells land as received and the one who divides, services and markets it plot by plot. The latter charges VAT on its sales of building land, and can then deduct the VAT on its works.
Whether VAT is due depends only on the seller and the asset. Whether the buyer is an individual or a company makes no difference.
The buyer's status matters, however, at two other levels. It conditions access to the favourable transfer duty regimes: only a buyer who is a taxable person and has filed its declaration of existence can give an undertaking to resell or to build (BOI-ENR-DMTOI-10-40, § 140 and 150). It also determines the real cost of the VAT: neutral for a buyer who deducts it, final for one who cannot recover it. This second variable drives the choice between option and exemption, and it is the diagnosis we carry out before any disposal of a real estate asset.
When the seller is a taxable person, the regime of the sale depends on the category of the asset. The FTC distinguishes four (FTC, art. 257, I, 2). Two are taxable as of right: building land and buildings completed five years ago or less. Two are exempt, unless the seller opts: land that is not building land and buildings completed more than five years ago (FTC, art. 261, 5; BOI-TVA-IMM-10-10-10-20, § 1).
The definition is objective. Building land is any land on which construction may be authorised under the town planning documents applicable on the day of the sale: local urban plan (plan local d'urbanisme), equivalent document or municipal map (BOI-TVA-IMM-10-10-10-20, § 10 to 30). The buyer's intention to build and the use it will make of the land are irrelevant. Land in agricultural zones is presumed not to be building land (§ 100).
Land that already bears a construction incorporated in the soil is not building land, and the notion of construction is broad: roads, bridges, car parks, pylons, boundary walls or industrial structures (BOI-TVA-IMM-10-10-10-20, § 30 and 110). A plot laid out as a car park, for example, is sold as a built property.
Two further points avoid the most costly classification errors:
The classification on the day of the sale has a second consequence. It conditions VAT on the margin on a later resale, which requires the asset to have been acquired under the same classification. Demolishing a building to resell the land loses the margin scheme, as explained in our article on the conditions of VAT on the margin for real estate (in French).
A building is new if it was completed five years ago or less. Completion may result from new construction, an extension in height, or works that have restored the building to a new condition (BOI-TVA-IMM-10-10-10-20, § 130). These works are assessed on four components, and one is enough (§ 240):
The ratio is calculated per trade, by cost or by a physical criterion (surface, length, number of items), comparing the new elements to the total elements of the trade after the works (§ 260 and 270). A heavy restructuring of an office building often crosses one of these thresholds without the owner having anticipated it. Its resale within five years then becomes taxable as of right on the full price.
The sale of a new building by a taxable person is subject to VAT as of right, subject to article 257 bis (§ 290). A building sold unfinished is not a new building: its sale is a sale of building land (§ 300).
The five-year period starts on completion (FTC, art. 257, I-2-2°). The BOFiP does not define completion in relation to this period but in relation to self-supply (livraison à soi-même), and that definition is applied in practice: completion means the filing at the town hall of the declaration certifying completion and compliance of the works (Town Planning Code, art. L. 462-1), deemed to take place when the progress of the works allows the building to be effectively used for its intended purpose (BOI-TVA-IMM-10-20-20, § 40). Where no declaration has been filed, the chargeable event of the self-supply is deemed to have occurred once the circumstances that made it mandatory are met (§ 50); in our view, the same reasoning applies to set the start of the five-year period. Works are completed when the construction has been fully carried out on all points covered by the permit, in accordance with its requirements and with the intended use stated in it (§ 60). Conversely, a construction that could not be used for any purpose without a further declaration gives rise to no supply of a new building (§ 70).
The test is therefore use, and the Court of Justice reasons in the same way. Asked about plots that bore only foundations, it held that they did not constitute a building: foundations can neither be occupied nor used for their intended purpose, and their supply is a supply of building land (CJEU, 7 Nov. 2024, case C-594/23, Lomoco Development). The judgment does not set a completion date, since the directive leaves that criterion to the Member States within a five-year limit (Directive 2006/112/EC, art. 12(2)). It does confirm, however, that it is fitness for use, and not a construction-site event, that makes a building.
Where the declaration is missing or does not reflect the actual state of the building, the date is reconstructed from factual evidence: acceptance report, first occupation, certificates. None is decisive on its own: an acceptance with reservations, like an occupation, may precede completion within the meaning of the permit. Each is read in the light of the same test: on what date did the building become usable for its intended purpose? A few months either way, it is this date that moves the sale from new to old.
The sale of a building completed more than five years ago, or of land that is not building land, is exempt (FTC, art. 261, 5). The seller who is a taxable person may waive the exemption by opting for taxation (FTC, art. 260, 5° bis). The option is exercised in the deed of sale, building by building (FTC, Annex II, art. 201 quater); a building sold in lots may be taxed for only some of them.
The option has three effects. It subjects the sale to VAT, on the full price or on the margin depending on the conditions of the seller's own purchase. It avoids the adjustment of the VAT deducted by the seller on the building, which the exemption would trigger. It gives a right to deduct the VAT on the costs of the sale, which is deductible only once the option is exercised.
The Paris Administrative Court of Appeal has just reminded a property dealer who resold without opting of this point: the intention to build does not save the deduction (in French; Paris Administrative Court of Appeal, 9 Oct. 2026, no. 25PA02314).
The option has, however, no effect on transfer duties. The acquisition from a taxable person of a building more than five years old bears duties at the standard rate, whether or not the seller opts, on the full price as on the margin (BOI-ENR-DMTOI-10-40, § 40). The same applies to land that is not building land.
A taxed sale bears VAT on the full price. That is the principle. Taxation on the margin is an exception, and it is decided at the time the seller itself bought the asset.
The margin scheme can only cover two sales: the sale of building land and the sale of a building more than five years old sold under the option. It requires that the seller's acquisition did not give a right to deduction and that the asset is resold under the classification it had when bought (BOI-TVA-IMM-10-20-10, § 1, 20 and 220). New buildings are always excluded.
The regime is going through a period of uncertainty. The Court of Justice has tightened its conditions (CJEU, 30 Sept. 2021, case C-299/20, Icade Promotion), and new administrative guidance has been announced for the first half of 2027. On 1 January 2027, the regime moves to articles L. 231-18 to L. 231-20 of the CIBS. We have devoted a full article to VAT on the margin for real estate and what turns on the date of your purchase (in French); the key point here is its effect on duties.
The reduced rate of 0.715% applies only to building land and new buildings sold with VAT on the full price. Building land sold under the margin scheme bears duties at the standard rate (BOI-ENR-DMTOI-10-40, § 40, 90 and 110).
The consequence for the negotiation is direct. On building land sold for €1,000,000 excluding VAT, the buyer pays around €63,200 in duties if the sale is taxed on the margin, against €7,150 if it is taxed on the full price. For a buyer who deducts VAT, taxation on the full price is often the cheaper of the two, whereas the margin remains the better option when selling to an individual. The choice is not made on request, however: the base follows from the conditions of the seller's purchase, not from the parties' preference.
On the transfer of all or part of a totality of assets between persons liable for VAT, no supply is deemed to take place (FTC, art. 257 bis). The buyer steps into the shoes of the seller. Applied to real estate, this rule produces two reliefs: no VAT on the sale of a new building, no adjustment on the sale of an old building. It is carried over to article L. 211-108 of the CIBS on 1 January 2027.
The isolated sale of an asset, outside any transfer of an activity, does not fall under article 257 bis (BOI-TVA-CHAMP-10-10-50-10, § 10). A building may nevertheless constitute a totality of assets on its own. According to the tax authorities, this is the case where the building, recorded as a fixed asset, is used for a letting activity subject to VAT and is sold with the leases taken over by a buyer who continues that letting activity, including in another form (ministerial reply no. 5782, National Assembly, 16th legislature; BOI-TVA-DED-60-20-10, § 282).
Four elements must therefore be met and proven: a building recorded as a fixed asset by the seller; rents actually subject to VAT, as of right or under option; current leases taken over by the buyer; a buyer who in turn records the building as a fixed asset and continues to let it with VAT. Recording it as stock, typical of a property dealer, reveals an intention to resell and rules out the relief (ministerial reply no. 7359, National Assembly, 15th legislature, OJ 10 July 2018, p. 6063). The mechanism is the same as for article 257 bis applied to transfers of a going concern.
Article 257 bis is not an option. When its conditions are met, there is no supply for VAT purposes. On an old building, the seller therefore cannot opt for taxation, and the buyer takes over the remaining adjustment period.
On the transfer duty side, the relief changes nothing for an old building: the standard rate applies (BOI-ENR-DMTOI-10-40, § 40). For a new building or building land included in the totality of assets, the tax authorities allow the reduced rate of 0.715% to be maintained (§ 120).
The classification as a totality of assets turns on facts that the tax inspector reconstructs years later: rent roll, VAT regime of each lease, date on which the last tenant left. Setting it out in the deed with supporting documents is the best way to secure it, and it is a point we systematically review with the notary before signing.
Depending on the case, the buyer of a property pays one of these three levels of duties. The first is the standard rate. The second is linked to VAT on the full price or to an undertaking to resell. The third is a fixed duty, linked to an undertaking to build.
The overall standard rate combines the departmental share (FTC, art. 1594 D), the municipal tax of 1.20% (FTC, art. 1584) and collection fees. The 2025 Finance Act allowed departments to raise their share from 4.50% to 5% for deeds signed from 1 April 2025 to 31 March 2028 (Law no. 2025-127 of 14 Feb. 2025, art. 116, II). The increase does not apply to the purchase of a first main residence.
Almost all departments have adopted the 5% rate, giving an overall rate of around 6.32%. About ten have kept 4.50%, i.e. around 5.81%, including Alpes-Maritimes, Drôme, Oise and Saône-et-Loire. Indre keeps the base rate of 3.80%, i.e. around 5.09% (tax administration table of rates at 1 February 2026). The tax administration updates this table several times a year: check the department's rate at the date of the deed.
In the Île-de-France region, an additional tax of 0.6% applies to offices, commercial premises and storage premises (FTC, art. 1599 sexies; BOI-ENR-DMTOI-10-40, § 65). An office building in Paris therefore bears around 6.92% in duties.
Sales of building land and new buildings subject to VAT benefit from a reduced overall rate of 0.715%, with no municipal tax (FTC, art. 1594 F quinquies, A; BOI-ENR-DMTOI-10-40, § 90 to 110). The reduced rate is conditional on payment of the VAT. It applies neither to a sale on the margin nor to an old building sold under the option.
A buyer who is a taxable person and undertakes, in the deed of purchase, to resell the property within five years pays only the land registration tax at the overall rate of 0.715% (FTC, art. 1115; BOI-ENR-DMTOI-10-50, § 30 and 40). This is the property dealer regime, useful for land and for buildings more than five years old.
Three rules frame its use:
A buyer who is a taxable person and undertakes, in the deed, to carry out within four years the works leading to a new building is exempt from proportional duties. It pays only a fixed duty of €125 (FTC, art. 1594-0 G, A and art. 691 bis; BOI-ENR-DMTOI-10-40, § 170). The undertaking may cover new construction, an extension in height, restoration to a new condition or completion of an unfinished building.
The period may be extended by one year, renewably. The request must state reasons and be sent no later than one month after the deadline; two months' silence from the authorities amounts to acceptance (§ 310 to 340). Proof of performance is given by form no. 940-SD or by filing at the town hall the declaration of completion and compliance of the works (§ 420). The two undertakings may also be substituted for each other, under strict conditions (BOI-ENR-DMTOI-10-50, § 100; BOI-ENR-DMTOI-10-40, § 490 to 510).
Table 1: the buyer's undertakings, what makes them fail and what it costs
Force majeure is accepted only where an external and unforeseeable circumstance made the resale impossible throughout the period of the undertaking (BOI-ENR-DMTOI-10-50, § 70). For land acquired in the hope that it would become constructible, it is excluded (BOI-ENR-DMTOI-10-40, § 280).
A property investment company, a taxable person for VAT, owns an office building in the Lyon metropolitan area. It acquired it new in 2016, off plan (vente en l'état futur d'achèvement), for €4,000,000 excluding VAT. It deducted all the VAT, i.e. €800,000, because it let the premises with the option for VAT. The last tenant left in spring 2026. The company sells the empty building in November 2026 for €5,000,000 excluding VAT.
The building was completed more than five years ago: the sale is exempt unless the seller opts. The building is empty and no lease is transferred: article 257 bis does not apply. The company deducted VAT on its purchase: if it opts, the sale will be taxed on the full price, the margin scheme being excluded.
Without the option, the sale is exempt. The company must adjust the deducted VAT for the remaining period (FTC, Annex II, art. 207, III). The building was acquired in 2016 and the adjustment period runs over twenty calendar years, from 2016 to 2035. The sale takes place in 2026: nine years remain, from 2027 to 2035. The adjustment amounts to €800,000 × 9/20 = €360,000. If the buyer records the building as a fixed asset, the company may transfer this right of deduction to it by means of a certificate, and the buyer will deduct it according to its own rights (FTC, Annex II, art. 207, III, 3).
With the option, the sale is taxed on the full price. The VAT invoiced amounts to €5,000,000 × 20% = €1,000,000. The company has nothing to adjust.
In both cases, the transfer duties are identical. The building is more than five years old: the buyer pays the standard rate, around 6.32% of €5,000,000, i.e. €316,000.
First buyer: another property investment company, which relets the offices with VAT. It deducts VAT in full. With the option, it pre-finances €1,000,000, which it then recovers through its returns; the tax cost is nil apart from cash flow. Without the option, it can receive the transfer certificate and deduct €360,000; the seller bears the adjustment, which is negotiated in the price. Both treatments are tax-neutral in VAT terms (not in transfer duty terms) for the seller and buyer taken together. The option is the simplest to implement.
Second buyer: a healthcare establishment, whose activity is exempt. It does not deduct VAT. With the option, it bears €1,000,000 of final VAT, on top of the duties. Without the option, the €360,000 adjustment stays with the seller, and the transfer is useless since the buyer cannot deduct. The total tax cost of the transaction goes from €1,316,000 with the option to €676,000 without it. The gap reaches €640,000, in favour of the exemption.
A variant highlights what is at stake on the duties. If the buyer were a property dealer giving an undertaking to resell, it would pay only 0.715%, i.e. €35,750, instead of €316,000. If the building were located in Paris, the additional tax of 0.6% would bring the standard duties to around €346,000.
The right answer depends neither on the seller alone nor on the asset alone: it depends on the buyer's right of deduction. With a buyer who recovers VAT, the option is neutral and preferable. With a buyer who does not, the exemption costs the transaction €640,000 less, and the question becomes how to share the adjustment in the price. This analysis is done before the price is set, and that is precisely the stage at which a tax lawyer's involvement changes the outcome.
The substantive rules of French real estate VAT do not change on 1 January 2027. Their location changes, and several deadlines overlap.
VAT leaves the FTC for Book II of the Code of Taxes on Goods and Services (Code des impositions sur les biens et services, "CIBS") on 1 January 2027 (Ordinance no. 2025-1247 of 17 Dec. 2025, amended by Ordinance no. 2026-671 of 27 July 2026). The recodification is made on a like-for-like basis, and administrative guidance based on the FTC remains enforceable (BOI-RES-TVA-000253).
The main references in this guide are therefore found in the CIBS as follows: the notion of taxable person in article L. 211-23, the article 257 bis relief in article L. 211-108, VAT on the margin in articles L. 231-18 to L. 231-20, and the regimes for land and buildings in the chapter on immovable property (articles L. 231-3 et seq.). Our FTC to CIBS concordance table (in French) lets you find each article.
Table 2: real estate VAT and transfer duties, what changes and when
For long transactions, the combination of these dates matters as much as the rules. Land bought in 2026 under an undertaking to build, built on in 2028 and resold in 2029 will go through the switch to the CIBS, the end of the duty increase and the new guidance on the margin scheme.
No, in principle. The sale of land as part of the management of your private assets is outside the scope of VAT. It falls within it if you have taken active marketing steps: servicing works, division and marketing of plots, professional-type sales means (CE, 9 Dec. 2022, no. 459206).
Only if the works have restored one of the four components to a new condition: the majority of the foundations, of the structure or of the façades, or two thirds of each of the six finishing trades (BOI-TVA-IMM-10-10-10-20, § 130 to 240). In that case, its sale within five years of completion of the works is taxable as of right.
No, if the building was completed more than five years ago. The duties remain at the standard rate whether or not you opt, on the full price as on the margin (BOI-ENR-DMTOI-10-40, § 40). Only the sale of building land or a new building with VAT on the full price gives access to the 0.715% rate.
The duties from which you were exempted on purchase, calculated at the rate applicable on the date of acquisition, with costs and late-payment interest (FTC, art. 1840 G ter and 1727). Interest runs from the first day of the month following the registration deadline of your purchase deed (BOI-ENR-DMTOI-10-50, § 110). A partial resale limits the reassessment to the part not resold.
Yes, by one year, renewably. The reasoned request must be sent by registered letter no later than one month after the deadline; without a reply within two months, it is accepted (BOI-ENR-DMTOI-10-40, § 310 to 340). The undertaking to resell, by contrast, cannot be extended, except in a joint development zone.
Not with certainty. The relief requires the transfer of a letting activity subject to VAT, with the leases taken over by a buyer who continues it. A building with no current lease does not, in principle, transfer any activity. If the vacancy is temporary, keep proof that you were actively looking for a tenant. Above all, have the point settled before signing: if the relief is set aside afterwards, the sale becomes exempt and the adjustment becomes due.
Yes, if your buyer records the building as a fixed asset. You give it a certificate stating the amount of VAT corresponding to the remaining adjustment period; it deducts it according to its own rights (FTC, Annex II, art. 207, III, 3). The transfer is only worthwhile if the buyer recovers VAT.
It depends on the company's activity and on the category of the asset. If the company acts as a taxable person, the sale of a new building is taxable as of right and the sale of a building more than five years old is exempt unless it opts. If the company merely manages private assets, the sale is outside the scope. The status should be checked before the preliminary agreement.
Because the sale of a new building by a taxable person is subject to VAT on the full price. To avoid double taxation, the duties are reduced to 0.715%, with no municipal tax (FTC, art. 1594 F quinquies, A). The reduced rate is conditional on payment of the VAT.
Nothing in the substantive rules: the recodification is made on a like-for-like basis and guidance based on the FTC remains enforceable. The references change: deeds will have to cite the CIBS. Former FTC references remain accepted in deeds and invoices taking effect until 30 June 2028 (BOI-RES-TVA-000253, § 3.1 and 3.2).
The VAT and transfer duties of a property sale are set before the preliminary agreement is signed, not at the notary's office the day before the deed. Five checks are enough to avoid most reassessments:
The tax cost of the same sale can vary by several hundred thousand euros depending on the answers, without the price having moved. If you are preparing a sale or an acquisition, we can analyse your transaction and quantify the possible treatments with your notary before signing.
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