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Property value added tax
Value Added Tax (VAT) is applicable on operations contributing to the production and commissioning of real estate.
The property VAT applies to the sales of buildings, land and buildings occurring within five years of their completion by taxpayers for that purpose.
Completed properties are taxed on the total price and calculated based on:
− The sales price, the amount of compensation or the value of the social rights corresponding to the gain, plus the additional charges
− Or the real, actual market value of the property, if this real market value is higher than the price, the amount of the expenses or the value of the social dues, increased by the charges.
VAT is generated by the act which defines the transaction, or if no such act exists, the transfer of ownership.
The VAT rate is applicable on property transactions of 20%. The tax is always due by the vendor.
However, VAT is not applicable to operations involving buildings or parts of buildings of over five years of age or, which, during the five years following completion have already been sold to a person other than an estate or property agent. Such operations are normally subject to transfer dues. In addition, VAT does not apply to sales of land upon which building is not permitted.
It is good to note that sales of such properties by taxpayers may be the subject of optional taxation.
The following are taxed on the margin if their purchase by a taxpayer did not give rise to any deduction entitlement:
− Sales of building land
− Sales of buildings completed more than five years ago where optional taxation rights have been exercised
Transactions not subject to VAT are normally subject to inheritance/transfer tax.
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