When you purchase a new build leaseback property, one of the main advantages is that you get the VAT back on the purchase price (as at 2010 the VAT is at a rate of 19.6%).

This will either be advanced by the developer in which case they will normally pay the last few staged payments, or more commonly, the purchasers pay the full VAT inclusive price and then claim it back from the French authorities.

Typically, each development where the VAT is to be claimed back will have chosen an accountancy firm to look after this aspect of the purchase. It is worth stating at this point that it is very important to use an accountancy firm as this is a complex process and if the procedures are not respected then you will not qualify for the VAT rebate.

The main reason in giving the VAT rebate is that VAT is earned by the French authorities during the period that the property is let out. This is on an understanding that the property will be let out to tourists for a period of 20 years. If the lease contract was terminated or the property sold before this time, then a part of the VAT would need to be re-paid the French authorities pro-rata. This works out at being 1/20th per year.

On refurbished property or renovated properties, the 19.6% VAT rebate is not normally applicable and the VAT that will be reimbursed, if any, varies according to the development. This should be clarified before purchasing.

Some renovated properties will require such renovation that it will be considered as a "new build" and will qualify for the 19.6% VAT rebate. It is important to establish this before purchasing.