New ruling on real estate VAT

Property tax: The Federal Court recalls the importance of timing and anticipation

In a recent decision of August 27, 2026 (TF 9C_680/2025), the Federal Court provided important clarification regarding real estate VAT, with concrete consequences for players in the construction sector.

In the case of real estate VAT, timing is crucial

The Federal Court confirmed that, for a real estate sale, the decisive moment for VAT purposes is the registration in the land registry.

In other words, neither the signing of the sales contract, nor the transfer of profits and risks, nor the handing over of the property are decisive; Only the transfer of the real right by registration in the land registry counts.

As a result, the essential VAT issues – notably the qualification of the transaction, the possible option for taxation, the VAT registration and the drafting of the contract – must be analysed and resolved upstream, that is, before registration in the land registry.

Why is this decision important?

The case before the Federal Court concerned a real estate company that had acquired a plot of land, launched a construction project and concluded a general contracting agreement. While the work had already begun, it sold a turnkey property to an investor. The deed provided for VAT on the commercial part of the property, with the intention of opting for it.

However, the real estate company was not yet registered with the VAT register at the time of the sale. It only requested registration later, with retroactive effect. The FCA did not accept the retroactive effect of the registration. The company was denied the right to recover the tax on the grounds that it was not registered at the time of registration in the Land Registry, while remaining liable for VAT since it was mentioned in the contractual documentation: «VAT invoiced = VAT due»

This ruling illustrates that in the real estate sector, a failure to anticipate can lead to significant VAT costs. He also recalls that real estate transactions are subject to a particularly technical VAT framework, where the qualification of the transaction, the determining moment, the possible exercise of the option, and the treatment of the preliminary tax must be assessed carefully.

In this context, a few general (non-exhaustive) reminders regarding real estate VAT deserve to be highlighted.

 1. Real estate sales: in principle excluded from the scope of VAT

The constitution and the transfer of real rights over real estate are, in principle, excluded from the scope of the tax.

In some cases, however, it is possible to opt for the taxation of real estate sales, provided that the legal requirements are met. This option is not possible, in particular, when the property is used exclusively for residential purposes.

Consequently, unless a valid option or case of taxable sale exists, the sale in principle does not entitle the buyer to deduct the preliminary tax on the costs associated with the transaction.

2. Taxable or excluded sales in the case of a building under construction

According to the AFC’s practice, it is necessary to examine, in particular, whether the promise/sales contract and/or the business contract (depending on the case) were concluded before or after the start of the construction works.

This distinction is essential to determine:

• • if the transaction is taxable or excluded in light of the time at which the contracts were concluded, relative to the start of the works;
  • if VAT can be charged (option available);
  • and if the advance tax can be recovered.

3. The value of the land does not enter into the calculation base.

Even when a sale is taxable or an option is exercised, the value of the land (terrain) never enters the VAT calculation base. It must therefore be properly identified and documented.

4. Land development / equipment: attention to VAT treatment

The costs associated with developing or equipping the land must be analyzed separately from the land itself. Indeed, especially when the developer and the general contractor are third parties, development constitutes a taxable operation for VAT purposes.

5. Mixed operations require special attention 

When a project involves surfaces or objects that are subject to different VAT treatments, special attention should be paid:

• • to the ventilation of the values;
  • to the impact on the deduction of the advance tax;
  • and to the documentation of the distribution keys.

The practical message: anticipate sufficiently early

This ruling reminds us that real estate VAT is complex and should not be dealt with at the end of the process, at the time of signing or invoicing, but from the very beginning of the project development phase.

Anticipation is essential, especially when the operation involves (non-exhaustive list):

• • a sale of a building under development (before the start of the works)
  • the sale of an existing or under construction property;
  • a sale of land with development
  • a transformation intended for sale;
  • an operation in the VAT scheme (subject to or not subject to VAT);

Our recommendation

In real estate projects, ensuring the correct VAT treatment comes first of all through an analysis carried out at an early stage.

An early review allows, in particular, to verify:

• if the transaction is subject to or excluded from VAT;
• if an option is possible, notably for the purpose of recovering the advance tax;
• if the VAT registration takes place at the right time;
• and if the contractual documentation correctly reflects the VAT treatment applied and allows the recovery of VAT on the construction costs.