France raises VAT on house improvements

Mon 24th Mar 2014

Following the rise in French VAT to 20% and changes to reduced VAT rates in January 2014, the French VAT authorities have last week confirmed  that the reduced VAT rate on home improvements will now be 10%.

The rate had been 7%, but this rate has now been abolished with goods or services moving to either 5.5% or 10% reduced VAT.

There are however a number of exceptions whereby the old 7% VAT rate may be applied. This includes works started before the 1 January 2014 inception date, and where there has been at least 30% of the final fees paid-up in advance. This concession has been granted because of very poor weather in France over the winter.

Only a small number of the 28 EU member states apply a reduced VAT rate for improvements to home dwellings. These include: Czech Republic; Denmark; Spain; Ireland; Netherlands; and Poland. The European Commission only permits member countries to used reduced VAT rates in a number of limited situations, as defined in the EU VAT Directive.