Question 5999 — value added tax

Summary

Mr. Patrick Mignola draws the attention of the Minister of the Economy and Finance to the VAT regimes applicable to real estate transactions involving the sale of plots of land extracted from built complexes. According to tax doctrine, VAT can only be calculated on the margin if the resold property is identical to the acquired property. It bases its position on article 268 of the general tax code (CGI) which provides that VAT can be calculated on the margin if it is established that the acquisition of the property by the transferor did not give rise to the right to deduction. However, the tax administration, in its comments on article 268 of the CGI, reserves the application of the VAT regime on the margin only to deliveries of buildings acquired and resold while keeping the same classification. It specifies that only building land that has been previously acquired is subject to margin VAT. as land not having the character of built buildings, or buildings completed more than five years ago having previously been acquired in the state of an already built building. It follows from this condition of identity that construction-sale operations, as well as sales of building land after demolition of the buildings built there, are excluded from taxation on the margin. Thus, in the event of a parcel division occurring between the initial acquisition and the transfer having resulted in a change of qualification, the taxation must be based on the total sale price. This situation is particularly damaging for small municipalities in France which are required to carry out comprehensive urbanization operations, often lacking in the private sector, and which must therefore repay VAT which they have not collected from buyers. This position nevertheless been reaffirmed on several occasions by the Government. However, the Grenoble administrative court, in its decision of November 14, 2016, ruled in favor of the taxpayer by noting in Article 268 of the CGI that “the application of VAT on the margin (...) is conditional on the sole fact that the acquisition by the transferor did not give rise to the right to deduct VAT; that contrary to what the administration maintains, it does not appear not of these provisions that the land resold as building land must necessarily have been acquired as land not having the character of a built building”. This decision should lead the tax administration to modify the terms of its doctrine. He therefore asks him if he intends to re-examine his position regarding the restrictive conditions defended by the tax administration until now.

Machine translation from French. The official text remains authoritative.

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