What rent should be charged for a villa with an exceptional view of the Gulf of Saint-Tropez?

A taxpayer sold a villa he owned to a real estate investment company (SCI) that he controlled, which offered an exceptional view of the Gulf of Saint-Tropez. The villa included two garages and a large swimming pool, and was situated within a two-hectare landscaped park that also featured a caretaker’s house.

The real estate investment company then leased the villa to the taxpayer for a monthly rent of 3,000 euros, excluding utilities.

Following a tax audit,administration determined that the rent was abnormally low. They therefore issued a tax assessment challenging, in particular, the property losses reported by the taxpayer.

To determine the rental value of the villa,administration first applied a rate of return of 2.4% to the purchase price, resulting in a monthly rent of 14,000 euros. It then adjusted this rental value by applying the residential building construction index, resulting in rental values of over €210,000 per year for 2015 and 2016.

The taxpayer attempted to defend himself by arguing that, for the purposes of the housing tax, the portion actually used by the tenant was considered to exclude most of the property. The purchase price used to calculate profitability should therefore have been based solely on that portion in use. Using this method, the taxpayer submitted an appraisal report that concluded the rental value was 57,408 euros per year.

The Court noted, however, that the lease agreement entered into with the SCI provided for the entire property to be made available to the taxpayer. It further noted that rental rates for other homes in the department could not be used as comparables due to the villa’s exceptional nature.

Finally, the Court finds that the taxpayer has not provided evidence showing that the villa had become dilapidated and, more importantly, that the rate of return would be excessive because the company did not have an air-conditioning system.

The Court therefore upholds the tax assessment and the challenge to the property-related tax losses.

CAA Versailles, May 27, 2025, No. 23VE00745

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