You buy an older four-room flat for €180,000, you commit €60,000 to renovation works and you resell it for €320,000 eighteen months later. On paper the apparent gain is simple: 320,000 − 180,000 − 60,000 = €80,000. In reality, once acquisition costs, financing costs and above all VAT on margin are taken into account, the net margin before tax falls to €40,680 — barely more than half. That is the whole difficulty of being a property dealer (marchand de biens — the French BIC tax status): profitability is never measured by the gap between the purchase price and the resale price, but by the net margin, line by line.
The status comes with trade-offs: taxation as industrial and commercial profits (BIC — bénéfices industriels et commerciaux) with no holding-period allowance at all, professional-seller obligations, and VAT rules to master. But it also opens two levers that private individuals do not have: registration duties cut to 0.715% thanks to the undertaking to resell (article 1115 of the CGI — Code général des impôts, the French General Tax Code), and VAT computed on the margin alone rather than on the full price (CGI article 268). This article sets out the full calculation, with figures and legal references.
0.715% instead of 5.81% to 6.32% — that is the registration-duty rate for a property dealer who undertakes to resell within five years (CGI article 1115). On a €180,000 purchase, the duty falls to €1,287, against roughly €11,370 in full duties at the increased departmental rate.
What this article covers
This article sets out the full net-margin calculation for a buy-renovate-sell deal: the tax definition of a property dealer (CGI article 35), VAT on margin and its 20/120 formula (CGI article 268), registration duties cut to 0.715% under the undertaking to resell (CGI article 1115), the difference with the private capital-gains regime, a fully worked example and the mistakes that destroy the margin.
Property dealer: a tax status defined by article 35 of the CGI
Being a property dealer is not a legal form but a tax classification. Article 35, I-1° of the French General Tax Code (CGI) places within industrial and commercial profits (BIC) the profits of persons who "habitually buy, in their own name, with a view to reselling them, buildings, businesses, or shares or units in property companies". Two cumulative conditions trigger the classification: the habitual nature of the transactions and the speculative intent — the intention to resell — assessed at the time of purchase (BOFiP, the French tax administration's official doctrine, BOI-BIC-CHAMP-20-10-10). Case law makes clear that a long interval between purchase and resale does not, on its own, rule out the classification: what counts is the intention at acquisition.
Habitual dealing is assessed on a body of evidence: frequency and repetition of transactions, short holding periods, the seller's occupation, the scale of value-adding works. It can even follow from several sales within a single operation — typically a break-up sale, unit by unit. Conversely, the sale of a main residence belongs to private wealth: it stays within the private capital-gains regime and benefits from the exemption in article 150 U, II-1° of the CGI, save for abusive arrangements.
Trading stock, not assets: the major tax consequence
In a property dealer's accounts, buildings are booked as trading stock, not as fixed assets. The direct consequence is that no holding-period allowance applies. The profit on each resale is a commercial profit, taxed on the progressive income-tax scale (BIC category, with social contributions) for a sole trader, or to corporation tax (IS — impôt sur les sociétés) in a SAS or SARL: 25% at the standard 2026 rate, and 15% up to €42,500 of profit for SMEs whose turnover does not exceed €10M and whose fully paid-up capital is at least 75% held by individuals (CGI article 219, I-b).
This is the great difference with a private individual reselling a property: that person falls under the private real-estate capital-gains regime, with the holding-period allowances of article 150 VC of the CGI. How that regime works — rates, allowances, surtax — is set out in our guide to calculating real estate capital gains. A property dealer benefits from none of these mechanisms: reselling after six years or after six months makes no difference to its tax bill.
| Criterion | Private individual | Property dealer |
|---|---|---|
| Tax regime on resale | Private capital gain: 19% income tax + 17.2% social charges | BIC on the income-tax scale, or corporation tax at 25% / 15% up to €42,500 |
| Holding-period allowance | Yes (CGI article 150 VC) | None (properties held as trading stock) |
| Registration duties on purchase | 5.81% to 6.32% (full duties) | 0.715% with the undertaking to resell (CGI article 1115) |
| VAT on resale | Outside the scope (management of private wealth) | Depending on the property: exemption, VAT on margin, or VAT on the full price |
The obligations of a professional seller
The activity is commercial by nature: registration with the trade and companies register (RCS — registre du commerce et des sociétés, together with the national business register) and commercial accounting are required. Above all, a property dealer is a professional seller deemed to know the defects of the thing sold: the presumption is irrebuttable under the settled case law of the Cour de cassation (the French supreme court for civil matters), and any clause excluding the warranty against hidden defects is treated as unwritten as regards the dealer. Finally, where the dealer has works carried out that fall under the ten-year structural warranty — heavy or structural renovation — building-damage insurance (assurance dommages-ouvrage) is compulsory (French Insurance Code, article L. 242-1).
How to calculate a property dealer's net margin
The net margin is what is left once every cost has been deducted, not the simple gap between purchase price and resale price:
Net margin = resale price − acquisition price (costs included) − works − financing costs − any VAT on margin − fees and marketing costs.
Three items account for most calculation errors: VAT, registration duties, and the regime applying to a building completed more than five years ago. Let us take them one at a time.
VAT on margin (CGI article 268): 20/120, not 20%
VAT on margin applies to supplies of building land and, by election, to buildings completed more than five years ago, where the acquisition did not give rise to a right of deduction of VAT — typically a purchase from a private individual or a non-taxable person (CGI article 268, recodified as articles L. 221-18 to L. 221-20 of the Code des impositions sur les biens et services — the CIBS, the French Code of Taxes on Goods and Services — on 1 September 2026). The taxable base is the difference between the sale price and the purchase price. And that margin is understood as being inclusive of all taxes: the VAT is computed "inside" it.
VAT = gross margin × 20/120. On a €140,000 margin: 140,000 × 20/120 = €23,333 — and not €28,000 (20% applied "on top").
The regime also requires legal and physical identity between the property acquired and the property resold, a condition developed by case law: CJEU, 30 September 2021, Icade Promotion (case C-299/20), then Conseil d'État, 11 October 2022, No. 464561 — the margin regime is refused for building land created by subdividing a built plot after the acquisition (a subdivision carried out before the purchase, by contrast, does not block the regime). The Conseil d'État specified in 2024 that the property is classified according to the terms of the deed of acquisition (CE, 2 April 2024, No. 466644, Echo 5). For purchases from private individuals falling outside the scope of VAT, access to the margin regime remains admitted under the administrative doctrine in force.
Reduced notary fees: the 0.715% of the undertaking to resell
The second lever is article 1115 of the CGI. A VAT-registered buyer who gives, in the deed, an undertaking to resell within five years (reduced to two years for certain break-up resales, unit by unit) benefits from a land-registration duty (taxe de publicité foncière) cut to 0.715% instead of the ordinary duties. The rate breaks down as follows: 0.70% of land-registration duty (CGI article 1594 F quinquies) plus assessment and collection costs, set at 2.14% of the amount of the duty (CGI article 1647 V). On €100,000: €700 of duty and €15 of costs, i.e. €715.
The comparison with full duties speaks for itself: since the 2025 Finance Act, most departments have raised their rate, which puts transfer duties between 5.81% and 6.32% of the price depending on the department — the detail is in our article on notary fees in 2026, department by department. On a €180,000 purchase, the undertaking to resell brings the duty down from roughly €11,370 (at 6.32%) to €1,287.
Beware the shortcut "notary fees at 0.715%": the reduced rate covers only the land-registration duty. On top of it come the notary's own fees (a regulated proportional scale, around €2,200 including VAT for a €180,000 purchase), disbursements and the 0.10% property-security contribution. The accurate phrase is therefore "reduced registration duties", not "notary fees at 0.715%".
There is a variant for operations that produce a new building: the undertaking to build within four years (CGI article 1594-0 G, A) exempts the purchase from duties, replaced by a fixed duty of €125 (CGI article 691 bis), with an annual extension available on a reasoned request. Under both regimes, failing to honour the undertaking is expensive: the balance of duties becomes payable, plus the late-payment interest of article 1727 of the CGI — 0.20% per month, i.e. 2.4% per year (the 4.80% rate still found on some websites has been out of date since 2018).
Buildings over five years old: exemption, election, margin or full price
The sale of a building completed more than five years ago is exempt from VAT as of right (CGI article 261, 5-2°). A VAT-registered dealer may nevertheless elect for taxation, deed by deed, by stating it in the deed of sale (CGI article 260, 5° bis; BOFiP doctrine, BOI-TVA-IMM-10-10-10-30). Which regime then applies depends on the conditions of the acquisition:
| Situation | VAT regime on resale | Reference |
|---|---|---|
| Election + acquisition without a right of deduction (purchase from a private individual) | VAT on the margin, at 20/120 | CGI article 268 |
| Election + acquisition that gave rise to a right of deduction | VAT on the full price | CGI article 260, 5° bis |
| No election | Exemption as of right (no VAT charged) | CGI article 261, 5-2° |
Whether the election is worthwhile is assessed case by case — in particular according to the status of the end buyer and the VAT borne on the costs of the operation — and should be validated with an accountant before signing. One last point to watch: works of such a scale that they make the building "new" within the meaning of article 257, I-2-2° of the CGI (renewal of the majority of the secondary structural elements, of the foundations, and so on) shift the resale into VAT as of right on the full price.
Worked example: €180,000 purchase, €60,000 of works, €320,000 resale
Profile: you buy from a private individual an older four-room flat of about 90 m² in Le Mans, for €180,000 — a price consistent with the local market, between €1,940/m² (DVF median, the French public land-transactions database) and €2,105/m² (PAP index at 1 July 2026). You commit €60,000 to works, finance €200,000 with an interest-only professional loan (capital repaid at maturity) over 18 months, and resell at €320,000. The building is more than five years old; you elect for VAT, and since the purchase from a private individual gave rise to no right of deduction, VAT on margin applies.
On the financing: average mortgage rates for private borrowers stood at 3.26% in June 2026 (Observatoire Crédit Logement/CSA), but a professional property-dealer loan — often interest-only over 12 to 24 months — is priced higher. Take an indicative range of 3.5% to 4.5%, excluding arrangement fees; we use 4%.
Scenario — Resale at €320,000 after 18 months, VAT election, margin regime
| Line item | Calculation detail | Amount |
|---|---|---|
| Resale price | — | €320,000 |
| Acquisition price | Purchase from a private individual | − €180,000 |
| Reduced registration duties | €180,000 × 0.715% (undertaking to resell) | − €1,287 |
| Notary's fees, disbursements, property-security contribution | Regulated scale + estimated flat amount | − €2,700 |
| Renovation works | Secondary structural work + energy renovation | − €60,000 |
| Financing costs | €200,000 × 4% × 18 months | − €12,000 |
| VAT on margin | (320,000 − 180,000) × 20/120 | − €23,333 |
| Net margin before tax | Sum of the line items above | €40,680 |
The reading is brutal: the apparent €80,000 gain melts down to €40,680 before tax, and VAT on margin alone absorbs €23,333 of it. In a company subject to corporation tax and eligible for the reduced SME rate, tax comes out at 15% up to €42,500 of profit, i.e. about €6,102: you are left with €34,578 net. Note also the effect of article 1115: roughly €4,000 of acquisition costs in total (reduced duty included), against nearly €14,500 in "full" costs — without the undertaking to resell, the duties would have cut a further €10,083 out of the margin.
What the works consist of feeds directly into the resale price: the DPE class (Diagnostic de Performance Énergétique — the French Energy Performance Certificate) achieved at the end is one of the parameters the market prices in, as our analysis of green value and the impact of the EPC on the sale price shows. For the EPC strategy of a buy-renovate-sell professional — which class to target, which items to prioritise — see also the OneDpe guide on property dealers and the EPC.
The four mistakes that destroy a property dealer's margin
Mistake No. 1 — Computing VAT at 20% "on top" of the margin
The margin (sale price − purchase price) is inclusive of all taxes: VAT is computed at 20/120, i.e. 16.67% of the gross margin. On €140,000 the gap is not trivial: €23,333 on the correct calculation, against €28,000 if you apply 20% directly — €4,667 of margin understated in your business plan, enough to wrongly rule out a viable deal.
Mistake No. 2 — Assuming VAT on margin applies automatically
A building more than five years old is resold exempt as of right; the margin regime requires the election for taxation (CGI article 260, 5° bis), an acquisition that gave rise to no right of deduction, and legal and physical identity of the property between purchase and resale. Subdividing the land after the purchase loses the margin regime on the building-land plots so created (CE, 11 October 2022, No. 464561). Check the conditions deed by deed, from the preliminary agreement onwards.
Mistake No. 3 — Counting on a holding-period allowance like a private individual
The holding-period allowances of article 150 VC of the CGI apply only to private individuals. For a property dealer, buildings are BIC trading stock: the profit is taxed in full, whether the resale takes place after six months or after six years. Building a cash-flow plan on an "exemption after five years" is a mistake about which regime applies, not a piece of optimisation.
Mistake No. 4 — Letting the resale deadline slip
If the resale does not take place within five years (or the construction within four years under the undertaking to build), the tax authorities claim the balance of duties — the gap between 0.715% and the full duties — increased by the late-payment interest of 0.20% per month (CGI article 1727), i.e. 2.4% per year. On the example above, that is roughly €10,083 of additional duty, before interest. For the undertaking to build, plan ahead: an annual extension can be requested on a reasoned application.
⚠️ Warning: works that are too ambitious change the VAT regime. If the renovation renews the majority of the secondary structural elements, or touches the foundations and the structure to the point of making the building "new" within the meaning of article 257, I-2-2° of the CGI, the resale becomes subject to VAT as of right on the full price — no margin regime, no exemption. Cost that risk out before finalising the works programme.
Work out your net margin before making an offer
Mon Simulateur Immobilier buy-to-sell simulator
Cost your deal from end to end: acquisition price and costs, works budget, financing costs and the net margin of the operation. In a few seconds you can test how sensitive your margin is to the resale price, and identify the threshold below which the deal no longer pays.
To go further: the notary-fee calculator to compare full and reduced duties, and the renovation budget simulator to firm up the works line.
Conclusion
Being a property dealer turns on three mechanisms: VAT on margin computed at 20/120 (CGI article 268, recodified into the CIBS on 1 September 2026 with no change of substance), registration duties cut to 0.715% under an undertaking to resell (CGI article 1115), and a profit taxed under BIC with no holding-period allowance at all (CGI article 35). The 2026 Finance Act changed none of these three pillars. What separates a profitable deal from one you merely endure is the line-by-line net-margin calculation — before the offer, not after.
Before committing, stress-test your assumptions: the Mon Simulateur Immobilier buy-to-sell simulator rebuilds the net margin of your deal and shows you where it deteriorates — a purchase price that is too high, works that are underestimated, or a resale price that is too optimistic.
