The Leaseback Scheme

If investment over personal use is the primary reason for purchasing a property then the French leaseback scheme could be right for you. The scheme created by the French Government in the 1970’s was designed to increase the amount of short term accomodation in France as there has always been a chronic shortage. This could be either tourist accomodation in holiday resorts or business accomodation in city centres in large business hubs. The scheme involves you buying a property freehold and then granting the lease of it for 9 to 11 years to a management company who pay you a fixed guaranteed rental income in return. You also save substantially on French tax and have a low risk no hassle investment.


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Refunded VAT: One of the great bonuses of this scheme is that the purchaser gets a full refund of the TVA (VAT) of 19.6% if it is a new build property which is either refunded 6-9 months after completion or paid and recalimed by the developer. When the initial lease period expires the management company usually has the right to lease it again until the 20th year but if the owner is not in agreement it is rarely insisted upon. If you choose not to lease your apartment out again or sell it then you will have to pay a proportion of the TVA according to how many years are left outstanding from the first 20 years. For example, if the property has been under lease contract for 11 years and there are therefore 9 years remaining, then the amount of TVA that must be paid back to the French government is 9/20ths of the TVA. After 20 years TVA is no longer payable. Should you wish to sell your property within the lease period then you must sell it with the lease contract intact to someone who is prepared to see the contract through.

Guaranteed return on investment: The guaranteed investment return will typically be around the 5% mark net of all costs tax-free as you benefit from non-professional lessor of furnished property status (LMNP). This in effect means that you will receive as much interest as you would in a high yielding savings account as well as the opportunity to gain from capital appreciation of the property.

Personal Use: As the owner of a leaseback property you are often allowed to retain some weeks for personal use in return for a slightly lower rental income. If you choose not to use the weeks then you will usually get a higher annual yield.

The management company: An experienced management company will take care of the entire maintenance of the apartment or villa, usually with hotel services available such as reception, house linen, well-kept gardens, swimming pools and 24hr security.


Furnishing: Furnishing, decoration and electrical appliances are all supplied and maintained by the management company.

Accounting impacts during the loan’s term:

-Deductibility of the loan interest

– Deductibility of miscellaneous expenses (property taxes)

– Amortisation deductibility; 3.3% per year for 30 years, however they are deferred and not imputable in regard to the business income.


After the loan’s term the deferred amortisation can be imputed and set against the received net rents.

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