Property Taxation (real estate taxes) in France for American residents
France is one of the most attractive tourist and real estate investment destinations for American citizens.
French taxation, administrative and legal constraints are however, subjects of concern to American investors. Investments raise many questions about the tax consequences of acquisition procedures and of the various stages of the project (acquisition, ownership and transfer or disposal of the property).
This is an overview of France real estate taxes on an individual resident in the United States of America (U.S.A).
The land or property tax
In France, once an individual or a household becomes the owner of a property, whether built or not, they also become liable for the land or property tax.
The property tax is calculated annually by the tax 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).
The rental value, the taxable income of any owner
When it comes to French property taxation, it is impossible not to speak of the rental value since it is an essential data for the determination of your income tax.
This corresponds to the income that can be derived from the rental of the dwelling. Therefore, it is a matter of calculating a theoretical value for the property. To do this, many criteria are taken into account such as rents on the commune, the surface of the property, the number of rooms, the geographical situation, etc.
Rents income 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.
Once determined – the property tax is only for the first income tax return – the rental value will appear on the latter once the property concerned acts as the principal residence or is left voluntarily available to the owner.
Note that the existence of this taxable “property” 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.
The wealth tax or Impôt sur la Fortune Immobilière (IFI)
Owning one or more property necessarily 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.
Transfer taxes and real estate gains tax
Let us now turn to the French property tax component in case of a resale of the property. In this very particular situation, two mechanisms must be known:
- Transfer taxes: Registration fees (or transfer taxes), also known as “notary fees”, apply to almost all transfers for valuable consideration relating to property, 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. Their corresponding amount reaches 5.8% of the purchase value of the property or taking into account the increase in the departmental tax. To this, it would be necessary to add the expenses of notaries and other expenses, these could increase the costs of acquisition to approximately 7 to 8% of the purchase price.
- 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. contact us for specific advice on this matter. French real estate taxation is complex because many taxes cohabit and each relies on different bases and tax rules.
Whether it is the property tax, rental value, wealth tax or the existing duties and taxes on the resale of the property, owning a property in France can be a costly investment.