New opportunities for managing VAT options in the property rental sector

September 11, 2020

The charging of VAT on rents for bare premises for professional use and in particular offices is only possible by an option expressed by the landlords. If an option is not expressed, the rents are exempt from VAT.

The decision by landlords to opt or not to charge VAT on these rents is important and even more so given that up until now, according to the commentaries from the authorities and market practice, the option expressed for a building covered “necessarily” all the premises of this building (except residential tenancies are excluded from the option). It was therefore impossible to adapt the taxation of the rental activity to the ability, or not, to deduct the VAT from its tenants within the same building.

By an unprecedented judgment dated 9 September 2020, in a matter defended by our Firm, the French Council of State has just ruled that a landlord had possibility of limiting the option for charging VAT to certain premises only in a building (CE, 9 September 2020, n° 439143, 8th and 3rd ch. combined).

It marks a fundamental change in the real estate sector. This new solution opens up opportunities and enables, in particular, landlords to review their tax position to adapt to the market.

This decision undoubtedly opens up new perspectives. We invite you to rethink your rental strategy. Our teams specialized in VAT are available to assist you in this process.

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