There are various taxes to pay when owning property in France, as in every other country. To be considered a French resident for tax purposes, you must spend at least 183 days in France, or have a main resident home situated in the country, otherwise you will be considered a non-resident.
But either way, you will still be taxed in France on income arising from French sources, while you will also be liable for a number of other property related taxes. However, the levies charged may not be as high as you may think.
Whether you are or a not a French resident, you will need to obtain a Tax ID number from the local tax office in order to file your French tax return, even if you are a non-resident.
Any legal entity, regardless of its residence, with 50% or more of total French assets composed of French real estate, is liable to an annual tax of 3% on the fair market value of the property.
All transactions concerning real estate whose construction was completed more than five years prior to the transaction are subject to registration tax at the standard rate of 5.09% on the higher of the purchase price or fair market value of the property.
Land registry fees at 4.89% are payable on purchase of a property. A new-build/off-plan property is subject to VAT at 19.6% (called ‘TVA’ in France). However, in a sale & leaseback arrangement, it may be possible to claim back the VAT that would otherwise have been payable.
Capital gains tax is levied at a rate of 16% for EU residents and it drops by 10% per year from the fifth year, meaning after 15 years of ownership, no French capital gains tax is due.
Income tax is levied on income arising in France. For non-resident individuals, income tax is payable at progressive rates, but usually starts from 25% on income after allowable deductions, for expenses incurred in connection with letting or maintaining the property.
Furnished and unfurnished properties are treated differently for tax purposes. Income from unfurnished property is treated as non-commercial income, while income from furnished property is treated as commercial income.
Whether it is a furnished or unfurnished accommodation, rental income must be reported as income property or as business profits. The taxable amount is income less allowable expenses, including mortgage interest, insurance, estate agent fees, among others.
For non-commercial property, individuals who receive rental income of €15,000 or less may benefit from a simplified scheme called ‘Micro-Fonciers’, whereby the tax administration deducts an allowance of 30%. So you are taxed on just 70% of revenues.
For commercial property, the regime may apply if your annual income does not exceed €32,600.
Property owners may be liable to pay wealth tax on gross asset values in excess of €720,000, including property in France. Tax rates vary from 0.55% to 1.8% depending on the type of property. A deduction against this value is allowed for any outstanding debt (capital) on the property.
It is worth noting that Britain has a double taxation agreement with France to ensure people do not pay tax on the same income in both countries.
In accordance with French and international law, all residents in France (nationals and non-nationals alike) are required to declare assets or groups of assets held outside France. Assets may include bank accounts, securities, rights, insurance, annuities and property. The declaration is a separate exercise to the annual tax return.
There are three local taxes payable:
‘Taxe foncière’ [ownership tax] is an annual property ownership tax imposed on the owner, whether or not the property is actually occupied by them, or rented out. The amount owed each year varies on the nature and location of the property. If you sell the property part-way through the year the tax will be apportioned by the notary dealing with the sale. It includes a tax on buildings (excluding barns and inhabitable buildings) and a tax on land. New-build homes used as your home are exempt from taxe foncière for the first two years.
Bérangère Chabenat of The Spectrum IFA Group comments: “In France, once you are an owner you pay the taxe foncières. It is difficult to estimate it as it depends on the location, the condition of the property, and so forth. However, when prospecting for a property, the real estate agent will have all those details to show, along with the utility bills of the property, among other expenses.”
‘Taxe d’habitation’ is paid by the occupants of residential property on 1 January and is not apportioned if the property is sold later in the year. This tax is assessed on the notional rental value of the property and is set by the local land registry (‘cadastre’) and can vary per region.
“If you live in France, there is a taxe d’habitation,” Chabenat says. “Similar to the taxe foncière, it takes into account the size, location of the property, number of persons occupying the property, TV tax, and so forth. If the property is unoccupied by the owners, or rented however, only the taxe foncière will need to be paid.”
‘Ordures ménagères’ is an annual local tax charged separately for refuse collection.
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