BOFIP, 9 July 2026 – BOI-TVA-CHAMP-10-10-40-10
In a recent update to its guidance, the French tax authorities have clarified the VAT treatment of leasing agreements and hire-purchase agreements with an option to purchase (LOA) involving tangible movable property and real estate.
The BOFiP confirms that the transfer of possession of the asset to the lessee under a leasing or LOA agreement does not, in itself, constitute a supply of goods for VAT purposes. These agreements are treated as leases with a mere option to purchase, with the purchase price generally considering, at least in part, the lease payments already made. The transaction is therefore treated as a lease followed, where applicable, by a supply of goods upon exercise of the purchase option. The purchaser may, moreover, be a person other than the original lessee.
The guidance also provides clarification where the asset is subsequently disposed of by its owner. Where the asset is tangible movable property, the owner is treated as disposing of a used asset that was used for the purposes of its business.
For real estate, the disposal is subject to VAT in accordance with the rules set out in the French Tax Code subject in particular to the exemptions provided for under Article 261, and to the possibility of opting for VAT under Article 260.
Finally, where the asset covered by the agreement is not tangible, such as a business undertaking, the transaction is treated as a supply of services for VAT purposes.
This recent update therefore clarifies the distinction between the leasing phase and the potential supply of goods following exercise of the purchase option, as well as the VAT treatment applicable where the asset is subsequently disposed of.
