Building or renovating: five key decisions to make before getting a quote

The tax separates the two paths right from the quote stage.

New construction is subject to the standard 20% VAT rate . Renovations are eligible for two reduced rates, provided the property has been completed for more than two years and is used for residential purposes. Improvement, conversion, development, and maintenance work is subject to a 10% VAT rate . Energy efficiency improvements—thermal insulation, renewable energy heating equipment, ventilation control, and hot water production—are subject to the 5,5% VAT rate stipulated in Article 278-0 bis A of the French General Tax Code, the technical specifications of which are detailed in Articles 30-0 D and 30-0 E of its Appendix IV.

The difference is half between the two extremes. It cannot be made up after invoicing, and it conditions the comparison between an extension and a renovation of equivalent surface area.

Three conditions cause a construction project to switch to the normal rate

The two-year rule doesn't cover everything. The standard rate applies in three situations that a building owner encounters more often than they might think: when the building was completed less than five years ago ; when the work increases the floor area by more than 10% ; and when the project, due to its scale, is akin to the construction of a new building.

A generous extension on a recent house thus combines two reasons for switching, which shifts the arbitration towards the rehabilitation of the existing volume — the conversion of the attic responds precisely to this calculation, since it creates living space without creating a footprint.

The procedure has changed. The paper form is no longer required: the client now certifies on the quote or invoice that the conditions for the reduced rate are met, and keeps their copy until December 31st of the fifth year following the completion of the work. Any missing or incomplete information exposes both the company and the client to tax reassessment.

Two thermal regulations, two different approaches.

New buildings fall under the RE2020 regulation , which takes a life-cycle approach and imposes a carbon indicator in addition to energy requirements. Existing buildings are subject to a completely different, and much less well-known, system, which is twofold.

The standard thermal regulations, applied element by element, constitute the general legal framework: each component replaced or installed must meet a minimum performance standard, regardless of the project's scope. The more stringent overall thermal regulations apply only if three conditions are met simultaneously : a net floor area exceeding 1,000 m² , a completion date after January 1, ¹⁹⁴⁸ , and a cost of works exceeding 25% of the building's value excluding land. The corresponding requirements are set out in the decree of June 13, 2008 , while the standard costs used to assess the building's value are established by the decree of December 20, 2007.

The consequence is clear. The same renovation program, carried out in two phases rather than one, can remain below the 25% threshold and escape the overall regulations. This is a strategic decision regarding project management, not a trick: it is made before the application is submitted, and it commits the overall performance of the housing for decades.

The 150 square meter threshold is not only found in new construction.

The use of an architect is mandatory for floor areas exceeding 150 m² , a threshold lowered by decree no. 2016-1738 of December 14, 2016 for applications submitted since ^March 1 , 2017. Two clarifications govern its application in renovation.

First, the threshold is calculated based on the total surface area after the work , including the existing structure. A 30 m² extension on a 130 m² house would trigger the threshold, whereas the same extension, if built separately, would not. Second, the exemption only applies to individuals building for their own use: a real estate company, however modest its project, is still subject to the requirement. Moreover, the issue goes beyond mere formalities, and project management assistance is often warranted from the initial planning stages, even before the designer is selected.

Insurance cannot be purchased after the fact

The ten-year warranty under Article 1792 of the French Civil Code covers, for ten years, damage that compromises the structural integrity of the building or renders it unfit for its intended purpose. This warranty is the responsibility of the builder and applies to both renovations and new construction, provided the work constitutes a structure.

In contrast, structural damage insurance is taken out by the project owner before construction begins . It pre-finances repairs without waiting for liability to be determined, and its absence is costly twice: firstly, through the delay in compensation in the event of a claim, and secondly, through a reduction in the property's resale value within ten years. Checking the certificates of each contractor, ensuring they are up-to-date and cover the work performed, requires the same level of vigilance as choosing a ten-year structural warranty for the contractor.

None of these five points can be made up for during construction. They are decided when the program is finalized, that is, well before the first consultation with companies, and they explain that a properly planned renovation operation sometimes costs less than a new construction with equivalent performance — a difference that the revision of the DPE calculation has further accentuated.