A Big Tax Break Drives Demand for Homes in the French Alps

A Big Tax Break Drives Demand for Homes in the French Alps


When the Knight Frank agency analyzed the main drivers of French Alps property purchases in 2019, one factor outweighed the traditional lure of the slopes and the growth of summertime activities in the mountains.

“It is not exactly glamorous, but the single biggest driver right now for choosing a French resort, rather than anywhere else is a simple one: a very nice tax break,” said Roddy Aris, the agency’s head of sales in the French Alps.

France normally imposes a 20 percent value-added tax on property purchases, but the tax break refunds it to buyers of newly built properties who are willing to rent them to vacationers. It also slashes the normal 7 percent transfer tax to 2 percent.

Mr. Aris said the tax rebate is available across France but it is mostly used in the Alps because it is aimed at supporting the tourism industry by encouraging owners to make more beds available.

“The whole idea is to increase the number of ‘warm beds,’ which can be used by tourists, as opposed to ‘cold beds,’ which sit locked up behind shutters and are no good to anyone,” he said.

“The more warm beds and tourists there are, the more fondues are being sold, the more beers are being poured, and the more ski passes and ski lessons are being used.”

Knight Frank and the property consultancy Athena Advisers both say the tax break has become a factor for 80 percent of their customers in the French Alps, with Athena estimating that it has saved its customers almost 15 million euros in VAT.

The tax break has tight conditions and is restricted to new developments and completed projects less than five years old. But rebates range into the millions of euros.

An apartment marketed at €600,000, or about $658,000, will normally include €100,000 of VAT on top of a base price of €500,000, so the rebate would equal a sixth of the normal sale price.

“That sort of discount won the argument for me,” said Gary M., a corporate lawyer based in Singapore who does not want to use his full name to discuss tax matters.

A British citizen, Gary first considered buying a ski chalet in northern Japan or at a Swiss resort before learning about the French tax break, which he called a real game-changer.

“This has made all the difference for me and has put the French Alps way out in front,” he said.

Gary, who is in his early 40s, is looking for a property that will “wash its own face” with rental income before becoming a retirement option in 15 to 20 years.

He said he had looked in Niseko, Japan, “but prices have gone through the roof up there.”

“Even though the Alps is more expensive than some places, it’s more of a blue-chip type investment, in terms of future returns and property rises,” he went on.

“To be honest I had my mind set on something a bit more traditional, like an old cottage or a farmhouse with a lot of charm,” Gary said, “but then I was told about the VAT rebate for new-builds, and I suppose being in a new complex is more practical with less upkeep if you are not living there.”

Gary heard about the tax break from VINGT Paris, an agency through which he had already bought property in Paris. He is now considering an apartment in a development marketed by that firm in Méribel, France, two hours from Lyon and Geneva.

The Global Alpine New Development will include 95 apartments of one to three bedrooms ranging in price from about €400,000 to €1.3 million, after deducting VAT rebates of about €80,000 to €260,000.

Mr. Aris of Knight Frank says the biggest change in the Alps over the past decade has been a sharp rise in the number of owners renting out their properties. The typical chalet buyer is open to renting to tourists because the owners themselves usually plan to stay there for only a few weeks a year.

“Some retirees might spend three months there, but that is rare,” Mr. Aris added, “so it is a no-brainer to make some income by renting the place out when it would otherwise be empty, especially when that qualifies you for a large VAT rebate in the first place.”

An apartment in Les Glaciers, an 11-chalet development being marketed by Knight Frank in Courchevel Moriond, would receive total tax rebates of about €800,000, he said.

The four- to seven-bedroom chalets will be completed in the last quarter of 2021 with private parking and balconies and a shared swimming pool. Their prices range from about €2.5 million to €4.7 million, making the VAT savings about €410,000 to €780,000.

The tax breaks can also be granted to existing buildings if they go through extensive renovations. An example is Vail Lodge, being sold through Cimalpes in the Legettaz area of Val d’Isère, where two- to five-bedroom apartments are priced from €1.7 million to €4.9 million, meaning VAT rebates of about €280,000 to €810,000.

To qualify for the rebate, a buyer has to commit to making the property available for short-term rentals for 20 years.

Mr. Aris said the owner of an apartment that has received the rebate “technically has to rent the apartment to themselves whenever they want to use it.”

If they change their minds at any stage and convert property to purely private use, a portion of the VAT rebate must be repaid, depending on how much of the 20-year period is left. After 10 years, for instance, half the rebate would have to be repaid.

When a property that has received the VAT rebate is resold, the rebate will generally be factored into the price, Mr. Aris said, as the new owner takes on the responsibility of repaying some of the rebate if the property is converted to fully private use during the original 20-year period.

Knight Frank uses local partners to handle the renting out and managing of properties that have qualified for the rebate, with Cimalpes acting as a “one-stop shop” for clients in the Three Valleys area.

Giles D., a financial services manager in London who was also reluctant to use his full name, said he received the rebate when he bought a three-bedroom apartment in Val-d’Isère in February last year, but he warned that he “would never have done it without an agent to handle all the rebate paperwork.”

“It is actually really complex, and while I have bought lots of property in the U.K. before, this French bureaucracy would definitely have been beyond me,” he said.

“The amount of paperwork in France is incredible, and you have to be very careful that you meet all the conditions of the rebate scheme and don’t break them in the future,” he said.

Giles bought through Athena Advisers, which he said had put him in touch with legal services, insurance, a French bank for the mortgage and people to handle the rentals.

“They did it all,” he said. “That would be my advice to anyone doing this: Get people to help you through the process, because it so complex.”

To qualify for the rebate, a property must be offered for rent with services that a long-distance landlord could not provide without a local manager.

It must have three of the following four services: a check-in reception, an on-site or nearby breakfast service, the provision and cleaning of linen and room cleaning at least three times a week.

Giles’s second tip for users of the VAT tax break is to be aware that they must make the initial VAT payment before having it refunded after filing a French tax return.

“In my case, it only took seven months to get the money back, so that was fine, but people should realize that they have to put the money up in the first place,” he said.

Lloyd Hughes, a spokesman for Athena Advisers, said that until recently, the VAT rebate had been used only by developers creating “Residences de Tourisme,” which were normally at the lower end of the market and were offered with often-restrictive rental management contracts giving owners a guaranteed yield and a few weeks of private use each year.

“Buyers at the mid and high end are now getting involved, and our average property sale price in the French Alps is €1.4 million,” he said.

The seven-bedroom Chalet Le Rocher in Val-d’Isère, for instance, is for sale through Athena at €17 million, meaning a VAT rebate of €2.83 million.

In Méribel, the Antarès 1707 hotel is being converted into 70 apartments of two to eight bedrooms that will range from €2.11 million to €9.65 million, offering VAT rebates of €352,000 to €1.6 million.

Austria also offers VAT rebates, but only on properties in managed apartment-hotels.

Giles Gale, the managing director of Alpine Property Finders, said that apartments like these are part of the hotel when the owners are not using them and will generate income of up to 3 percent of the purchase price annually.

“Whilst buying into an apart-hotel development might seem restricting, they are much more hassle-free in terms of maintenance, and owners need never worry about linen changes and washing the towels,” he said.

“Owners have the same access as hotel guests to the other services in the development such as pools and spas,” Mr. Gale said. “We find that 80 percent of our clients are happy to rent their properties when they’re not using them.”

“If you’re beholden to school holidays, for example, you are going to be planning your skiing six months to a year in advance.”

Eligible mountain properties in Austria include the Elements Resort in Zell am See, where 37 apartments were completed in December, and the 44-apartment Glemm Residences in Hinterglemm.



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