What a French leaseback actually is
A French leaseback is a new-build unit inside a classified tourist residence, sold to an individual investor and simultaneously leased back to the operator under a nine-year commercial lease. The investor finances the acquisition, takes VAT back on the purchase price because the rental activity is VAT-bearing, and draws a guaranteed rent net of charges. The wrapper for the investor is the Loueur en Meublé Non Professionnel regime, known by its acronym LMNP, which allows amortisation of the walls and furniture against the rental income. For non-residents, the architecture is popular precisely because the operator handles everything; the owner barely sees the flat. It becomes complex only at exit, which is the moment this page is about.
The three tax layers on resale
When you resell a leaseback from abroad, three fiscal mechanics collide inside one deed. Layer one is the ordinary capital gains tax of Article 244 bis A, the same 19 per cent income tax plus 17.2 per cent (or 7.5 per cent) social charges and the progressive surtax above €50,000 of gain per seller. Layer two is the recovery of the VAT that the administration refunded at acquisition, which is not a disguised penalty but a strict proportional reversal over a 20 year adjustment window. Layer three is the fate of the commercial lease, which conditions whether the buyer can step into your VAT position and therefore whether layer two fires at all. Handling them in the wrong order, or forgetting one, is how leaseback resales produce the nasty surprises that show up on forum threads.
VAT regularisation over twenty years
The VAT you recovered on the off-plan purchase is attached to a 20 year usage of the flat as a VAT-bearing rental. If you resell before the twentieth anniversary and the rental activity does not continue under the same regime, the administration claws back one twentieth of the original VAT for each full year remaining. Sell in year 7 and you owe 13 twentieths back. Sell in year 18 and you owe 2 twentieths. The figure below shows how the liability decays year after year, which is the single most useful mental model for timing your exit.
View data as table
| Year of resale | VAT clawback share |
|---|---|
| Year 1 | 95% |
| Year 5 | 75% |
| Year 10 | 50% |
| Year 15 | 25% |
| Year 20 | 0% |
Capital gains tax specifics for LMNP units
The CGT computation starts from the VAT-exclusive purchase price if you recovered the VAT on acquisition, which is the situation for nearly every leaseback investor. You then add the notarial fees of the original purchase, registration duty, and any genuine renovation work documented by an invoice from a French VAT-registered trade. Furniture replaced inside the unit does not generally qualify because it is part of the LMNP business amortisation rather than the real-estate basis. You then deduct this corrected basis from the sale price agreed in the resale deed, and the remainder is the raw gain. The 22 and 30 year taper applies as on any bare apartment; nothing about the LMNP label shortens or lengthens it.
The commercial lease: transfer or break
The commercial lease is the central contract, not the deed of sale. If the buyer is willing to take over the existing operator lease on unchanged terms, the VAT regime continues, the administration asks for no clawback, and the adjustment window simply keeps ticking against the new owner. If the buyer wants the flat back for personal use, or wants to redirect it to a different operator, the lease stops or changes, the VAT regime breaks, and the clawback fires pro rata temporis. A third scenario, rarely discussed, is a change of operator without a formal break of the lease through a tripartite amendment; this generally preserves the VAT position provided the new operator assumes the existing lease rather than signing a fresh one.
Worked example
A UK resident bought a Pierre et Vacances leaseback in Morzine in 2015 for €250,000 VAT inclusive, recovering €41,667 of VAT on the new build. In 2026 the flat sells for €330,000 VAT exclusive to a French family who will not continue the lease. Remaining VAT window: 20 minus 11, so 9 twentieths of €41,667, meaning €18,750 of VAT clawback. The taxable real-estate gain is €330,000 minus €208,333 (VAT-exclusive basis) minus €16,000 of original notarial fees and works, so €105,667. Holding period 11 years: income-tax taper is six per cent per year from year 6, so 6 times 6 per cent, 36 per cent off. Taxable CGT base, €67,627; tax at 19 per cent, €12,850. Social charges at 7.5 per cent on €95,954 (different taper), €7,197. Surtax on €67,627, €1,480. Total real-estate layer: €21,527. Add €18,750 of VAT clawback: €40,277 out of a €121,667 paper gain before taper, which is the figure the accredited representative will guarantee.
Pitfall to avoid
The most expensive pitfall is promising the buyer a VAT-exclusive price while assuming the clawback will not fire. Three conditions must be met for the clawback to be neutralised: the buyer keeps the same lease, the operator remains the same (or formally assumes the lease), and the resale is documented as a going-concern transfer inside the deed. If any of the three fails, the seller owes the clawback even though the price tag suggested otherwise. I have seen Parisian buyers sign a standard deed with no reference to the lease, only for the seller to discover three months later that the administration had lost its VAT tether and was asking for €22,000.
Pro tip
If you are approaching year 15 and your operator has been paying rent reliably, run the numbers for holding until year 20 before accepting a resale offer. Over the last five years of the window, the VAT clawback drops from €10,000 at year 15 to zero at year 20, which on a €200,000 VAT initial base is a €10,000 straight-line gift to the passing of time. Combined with the income-tax taper, which moves from 60 per cent off at year 15 to 100 per cent off at year 22, the difference between selling at year 15 and selling at year 20 can comfortably exceed €25,000 of net proceeds on a single unit. Operators often renew the lease on better terms when the original term ends, which also makes the calendar work in your favour.
Key takeaways
- Leaseback resales trigger three fiscal layers: CGT, VAT clawback, and the lease-transfer question.
- VAT clawback drops by one twentieth each full year over a 20 year window.
- Buyer continuity of the operator lease is the only way to neutralise the VAT layer.
- CGT uses the VAT-exclusive acquisition price when VAT was recovered at purchase.
- Above €150,000 and outside the EEA, an accredited representative is still required.
Frequently asked questions
Do I need an accredited representative when I resell a leaseback as a non-resident?
Yes, whenever the sale price is above €150,000 and you live outside the EU, EEA, or Switzerland. The leaseback label does not change the Article 244 bis A trigger; it is the real-estate sale that matters, not the operating regime.
Can I keep the VAT I recovered on the original purchase?
Only if the buyer continues the commercial lease and takes over the VAT regime. Otherwise, the administration claws back one twentieth of the initial VAT for every full year remaining in the 20 year adjustment window.
Is the gain taxed on the VAT-inclusive or VAT-exclusive purchase price?
The acquisition basis for CGT is the VAT-exclusive price if you recovered the VAT, plus any non-recovered transfer duties and genuine improvement works. Mixing the two bases is the single most frequent cause of post-sale adjustment.
Does the 22 and 30 year taper apply to leaseback units?
Yes. The holding-period taper for income tax CGT reaches zero at 22 years and the social-charges taper reaches zero at 30 years, exactly like a bare apartment. LMNP status does not alter the taper schedule.