Commercial lease and operated properties in France
We are often asked to give an opinion about certain “leaback” it is very important to consider this carefully and ask for our assistance before committing into any kind of operating contract.
The most known but also to most legally heavy is the commercial lease…
We can summarise the legal and tax aspects of properties operated under commercial leases with VAT reclaim.
The key points include:
1. Legal Aspects of Commercial Lease:
- The commercial lease regulation aims to protect businesses, granting certain rights to tenants, including lease renewal and compensation for eviction (the famous “indemnité d’éviction”).
- Lease conditions, such as operating terms and service charge allocations, must be considered.
2. Tax Aspects of Commercial Lease:
- The furnished rental business tax regime (including the not less famous but often misunderstood LOUEUR EN MEUBLE PROFESSIONNEL (LMP) or LOUEUR EN MEUBLE NON PROFESSIONNEL (LMNP) provides tax advantages, including deductions for all costs and VAT reclaim under certain conditions.
- VAT reclaim involves opting for VAT liability and fulfilling obligations for a period of 20 years.
3. VAT Reclaim Mechanisms – some leases allow VAT reclaim
- Activities subject to VAT include providing accommodation services in tourist establishments and furnished property.
- Various practical aspects, such as registration as an operator, payment of VAT, and appointment of an accountant, must be addressed.
- Resale of the property before the end of the 20-year VAT reclaim period may be exempt from VAT under specific conditions outlined in Article 257 “bis” of the French Tax Code.
We can provide a lot of practical guidance on VAT reclaim procedures and requirements for resale transactions, but we need to emphasize the importance of details in complying with tax regulations and ensuring appropriate documentation.