Instead of the stamp fees paid on purchases of existing property, buyers of new housing are subject to VAT. However, the generally applicable VAT rate of 19.6% may be reduced to 5.5% under certain conditions.

This measure, which came into effect in July 2006, is designed to encourage property investment in certain neighborhoods and to facilitate home ownership. The lower VAT rate is covered by agreements between the French urban renewal agency ANRU (Agence Nationale pour la Rénovation Urbaine) and local municipalities. It applies to disadvantaged urban areas, extending to a perimeter of 500 meters around these areas. To benefit from 5.5% VAT, you need to build or purchase new housing for your primary residence. There are also personal income thresholds, which take into account the number of family members and the location of the apartment or house (Paris and immediate suburbs, the rest of the greater Paris region and other regions)

In Paris, for example, single persons are eligible for the lower VAT if their taxable annual income does not exceed €24,002. The ceiling is €66,797 for a family with three children. Outside the greater Paris (Ile-de-France) region, these ceilings are €20,868 and €47,590, respectively.

Taking advantage of 5.5% VAT for your first home purchase

Kaufman & Broad develops construction products that take into account recent measures to encourage home ownership, in a commitment to encouraging diverse communities and revitalizing struggling neighborhoods. The lower VAT rate is therefore perfectly aligned with our corporate citizenship and social responsibility process.

To be eligible for the 5.5% VAT rate you need to meet the following criteria:
- The new housing unit must be your primary residence.
- Your annual income must not exceed the ceiling set for the region where the property is located (calculated on the basis of number of people in the household).

Remember that you might also qualify for an interest-free loan to help finance your property.

Click here for a list of cities and regions where the 5.5% VAT applies