ultra-luxury property on the French Riviera, depicting the para-hotel scheme

Maximizing Returns with the Para-Hôtellerie Scheme: A Strategic Approach for Luxury Villas on the French Riviera

Services that Define Para-Hôtellerie

To qualify under the Para-Hôtellerie scheme, properties must offer at least three of the following services regularly, ensuring a standard comparable to a luxury hotel:

  1. Regular cleaning of the premises.
  2. Daily provision of breakfast.
  3. Regular supply of household linen.
  4. Dedicated reception for guests.

These services not only elevate the guest experience but also enable property owners to meet the high expectations typical of the luxury real estate market on the French Riviera.

Tax Benefits for Professional Operators

Being recognized as a professional operator in the para-hotel business offers significant tax advantages. This status allows for the deduction of all operational expenses, including utilities and property maintenance, thereby often reducing the taxable income to a low or even negative amount. Moreover, it impacts the taxation of capital gains on the resale of the property, favoring long-term investments.

VAT and Fiscal Incentives

Para-hotel operations benefit from a reduced VAT rate of 10%, with the possibility of reclaiming VAT on acquisitions or significant renovations. Committing to operate under this scheme for at least 20 years can further enhance VAT recovery, making it an attractive prospect for investors looking to develop or refurbish luxury properties on the French Riviera.

Implications on Resale and Capital Gains

Operators engaging in the para-hotel scheme are subject to a specialized regime for professional capital gains tax, which varies based on the duration of asset holding and the nature of the asset’s depreciation. Notably, there are tax exemptions available after five years of professional activity, providing substantial financial benefits upon the resale of luxury villas.

Considerations for Personal Use and Compliance

While the personal use of a property can complicate the validity of operating under the Para-Hôtellerie scheme, strategic planning can mitigate these issues. It is crucial for operators to maintain compliance with the defined services and operational guidelines to fully leverage the scheme’s benefits.

The Para-Hôtellerie scheme offers a structured path for managing and capitalizing on luxury real estate properties. For owners of luxury villas on the French Riviera, this scheme not only promises enhanced property value through superior service standards but also provides considerable fiscal advantages. Engaging with experienced real estate professionals like Elena Agueeva Real Estate can ensure that property owners navigate the complexities of this lucrative market, maximizing both compliance and profitability.

June 15, 2024

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