So-called commercial or professional premises may sometimes be subject to VAT or value-added tax depending on whether they are equipped, furnished, or bare. In any case, it is always preferable, as much for the owner as for the tenant, to ask that the rent is subjected to this taxation. This can be of some future benefit to each party.
If your commercial lease contract concerns the rental of premises equipped with furniture, equipment, or various installations, the rent must, in principle, be subject to value-added tax or VAT.
The only case where these types of leases for commercial use are not subject to the taxation in question is when the owner benefits from the franchise regime based on VAT.
Regarding bare premises, the rent is generally exempt from taxation, whether it is a commercial or professional lease. However, the owner can ask to be taxed. To do this, he contacts the tax authorities well before the rental agreement takes effect. This initiative can be profitable for the owner if he has paid VAT during the property’s purchase or construction.
On the tenant’s side, premises subject to VAT could prove to be more appropriate than rent exempt from taxation. This situation would be more profitable because the amount of the tax can be recovered by the occupant of the rented space afterward.
However, the lessor remains the main beneficiary since the lessee cannot under any circumstances deduct this charge from his rental costs. For the calculation, the rent has established a net of tax, then the rate of the tax charge due is added.
Are equipped premises taxable?
In general, commercial spaces equipped with furniture, equipment, or other facilities used for professional activity exercise are subject to value-added tax.
The tax rate is set at 20% of the rent. The only exception concerns cases of benefit from the basic franchise regime. In other circumstances, VAT is still applicable as long as the premises in question are said to be equipped.
The so-called furnished premises mainly concern meeting rooms or professional seats fitted with the furniture required for the activity’s exercise. Likewise, fitted out auditoriums, trade fair stands, and hotel or theater windows are subject to VAT. Tennis courts, exhibition halls, the civil society of a dental practice, or even buildings used as clinics are part of the large family of so-called equipped premises.
In contrast, furnished residential leases are, in principle, exempt from VAT, like unequipped commercial leases. There are at least some exceptions where furnished accommodation spaces are subject to Value Added Tax. If your investment project concerns a rental for a property to be housed, it is preferable to inform yourself more. The constraints are not the same.
As with many other administrative procedures, it is always essential to learn effectively before embarking on any rental agreement. The procedures are indeed somewhat delicate.
A single mistake can lead you to possible more or less inconvenient situations in the future. If you are blocked on certain points in your lease contract, do not hesitate to call on an expert in the matter.