Real Estate Taxation in France
The aim of this guide is to provide a broad introduction to the framework of France’s tax system. The DGFIP is France’s level government which can impose taxation on all French taxpayers. The French tax system is a mix of direct and indirect taxes levied by both the communes and the State, depending on the type of tax.
Owning a property in France is the perfect combination of a beautiful estate and a remarkable quality of living, France is one of the most attractive tourist and real estate investment destinations for non-residents and foreigners in the World.
However the taxation, administrative and legal constraints are all subjects of concern to foreigners and non-residents. The purchasing of a property raises many questions about the tax consequences of acquisition, the procedures and the various stages of the real estate project.
This is an overview of France real estate taxes on an individual neither resident nor domiciled in France who acquires, holds and/or disposes of French real estate.
1. Property tax
Once you buy a property in France, whether built or not, you automatically become liable for the land or property tax. The tax is calculated annually by the public authorities according to the cadastral rental value of the property and the rate determined by the local authorities.
The Property tax is generally paid in October. The specific deadline for payment varies depending on the method of payment chosen (by post, on the internet or by monthly payment).
2. The rental value, the taxable income of any owner
This corresponds to the income that can be derived from the rental of the property. It is therefore a question on calculating a theoretical value for the property. Many criteria are taken into account for this estimation, such as rents on the commune, the surface of the property, the number of rooms, the geographical situation, etc.
If rented, the Rents revenues must be reported to the tax authorities in the property income category. They include the investor’s taxable income after deducting certain expenses. The taxable amount is determined by the difference between the gross income from the land and the total costs of the property.
Note that the existence of this taxable “real estate” income for all owners is such that there are, in return, possible deductions for calculating tax income. The maintenance, operating and administration costs of a property can thus be deducted.
3. The wealth tax (IFI)
Owning a property in France has consequences on private wealth. The wealth tax is due when the net assets of a tax household amount to more than € 1,300,000. To learn more about this subject, consult our guide on property taxation in France.
4. Transfer and real estate gains tax
– Transfer taxes: also known as “notary fees”, apply to almost all transfers for valuable consideration relating to real estate, including all purchases or sales of dwellings. Withheld by the notaries, on behalf of the French tax authorities, they accompany the transfer of the ownership of a land or a building.
– The real estate gains tax is taxed on the gain realised by an owner at the time of the resale. Obviously paid by the seller, this tax is complex to calculate since it is based on the gain realized but also on the duration of ownership of the property concerned.
Whether it is the property tax, rental value, solidarity tax on wealth or the existing duties and taxes on a resale of property, owning a property in France can be a costly investment. You need to be carefully accompanied and guided in order to make the most out of your investment.
Cabinet Roche & Cie, Chartered english speaking accountant in Lyon, France.
Specialist in Real estate and non-résidents taxation.