Real Estate

The status of merchant of goods

A merchant of goods is a person in the business community, particularly in the sale of real estate. Whether it’s land, offices, houses, apartments, the merchant of goods buys, takes care of renovations when needed and resells these goods to others. This status is subject to many interpretations and is subject to special criteria. Focus on the status of merchant of goods.

The profile of the merchant

Any person who meets one of the following two conditions may be considered a merchant of goods: carrying out short-term speculative transactions (less than 2 years) and the experience of the number of buy-resale. The merchant of good is recognized by his habit and speculative intent. The only purpose of this trader is therefore only profit, but participates in the maintenance of the heritage. The merchant of goods shall not carry on an activity in his own name. He has the freedom to choose between an SAS or LLC adapted to his or her personal condition and current legislation.

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He may be the manager of the company for his real estate business. Any profits are subject to corporate tax. People who carry out buy-resale transactions, without this status, manipulate the rules of the game. This is explained by the lack of clarity in the attribution of merchant status and the free interpretation of blurred concepts such as “habit and speculation”. But only the opinion of the tax administration recognizes who is a merchant of goods and who is not.

Consequences relating to this status

One of the main consequences of merchant status is legal in nature. He is primarily a professional and must present secure and verifiable guarantees to its purchasers, the most important of which is the corresponding insurance obligation. This implies the professionalization of this profession, requiring greater responsibility. Fiscally speaking, two types of VAT calculation apply to the status of the merchant of goods: conventional VAT and margin VAT.

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In case of closure of a transaction that occurs within 5 years, notary fees are reduced accompanied by a multitude of possible operations. While the trade as a merchant of goods is also remunerative, it also presents many risks. A Operation that proceeds badly often has serious consequences. The merchant of goods can be subjected to banking and administrative procedures with balance sheets, statements of accounts, authorizations… He also has the heavy task of convincing his customers to accept his offer, as competition is increasingly harsh. The sale of real estate remains still dominated by large real estate companies, brokers…

In order to succeed in this profession and avoid requalification by the controllers, it is essential that the merchant of goods be able to present all the necessary accreditations and fully fulfil his tax obligations, including VAT, the tax on the eventual profit. Otherwise he is obliged to pay heavy penalties.

Which goods to select as a merchant of goods?

In order to ensure the highest possible rate of return, a merchant of goods must:

  • Be clear about the needs of future buyers, both on the exact location of the goods, their nature or even the area. If you are in a tourist area, you can offer renovated properties for buyers looking for a second home, or a furnished for seasonal rentals that will fall under the LMNP status for example.
  • Select quality goods to be able to make a nice added value on resale.
  • Know the types profitable investments. As a merchant of goods, it is possible to buy both in residential dwellings as in shops. On the other hand, devices in new housing such as the Pinel law are not interesting in the sense that it is better to buy premises requiring renovation work or transformation and resale within 2 years, to have a real surplus-value. Rental investment is therefore not to be considered unless you can squarely buy a building to renovate which is located in a pinel area. You can then offer apartments for resale under the Pinel device.