Taxes and fees for property owners in France
Taxes and fees for property owners in France
French Property Guide
Taxes for property owners
The initial purchase of a property in France will incur various fees and taxes. Because the notary will calculate and charge all the relevant taxes during the purchase process, you will not generally be aware of them as separate categories. The total taxes and fees can add up to as much as 20% of the price of a property, depending on whether the agent's fees are paid by buyer or seller.
- Agent's fees, where not paid by the seller: 5-8%
- Droit de mutation (stamp duty), 5.8%
- Notaire's fees, calculated on a sliding scale laid down by law: 2.5-5%
- Loan registration fee (if using a French mortgage to purchase the property) 1-3%
The Notaires de France web site includes a useful calculator for transaction costs.
Example of property purchase tax to be paid
Period property in L'Isle sur la Sorgue, Vaucluse (Provence) - a 'mas' with 8 bedrooms on a plot of nearly 3 hectares:
|Cost of property||1 450 000|
|Notary's costs on the purchase||13 008|
|Notary's costs on the mortgage||2 303|
|Stamp duty||84 196|
|Other state taxes||2 410|
|Value Added Tax on notary's costs||3 063|
|Total costs||105 600|
|Total including purchase price||1 555 600|
Ongoing taxes for property owners
Owning a French property makes you liable for one or both of the local property taxes, taxe foncière and taxe d'habitation. The first is paid by the legal owner of the property, while the second is paid by the occupant (if the property is let out) or owner. Whoever owns/occupies the property at 1st of January is responsible for the tax that year, though sale contracts usually apportion the tax between seller and buyer. (Asking the seller to pay the taxes can help reduce costs in some circumstances, for instance if a property has taken a long time to sell.)
These taxes are administered by the commune (the smallest unit of French government) and are based on the cadastral value. Values have been uprated over recent years, with the last updates due for completion in 2018, so purchasers should ask whether this has been done - if not there could be a nasty surprise waiting for them. The tax bills go out in September/October and August/September respectively, but can usually be paid in monthly instalments if this is more convenient.
(Now only on real estate)
Property owners may also be liable for wealth tax (Impôt de Solidarité sur la Fortune Immobilière). Non-residents will become liable if their property assets in France, and only in France, are worth over EUR 1.3m; however, debts related to the purchase, enlargement or improvement of the property can be deducted from its value. Obviously, it's tax efficient to use a mortgage for any major purchase.
French residents become liable for wealth tax on their worldwide property holdings. However, the value of their main residence is reduced by 30% for the calculation. It is worth noting that most individuals moving to France will benefit from an exemption from the wealth tax for their first five years of residence. Note that the ISF's reach includes indirectly held stakes in real estate assets, which can present a problem for individuals with large stakes in family businesses, or for business angels with stakes in companies which hold significant properties. However, assets used in your trade or business are exempt.
ISF is paid on a sliding scale from 0.5% up to 1.5% of total relevant assets.
French income tax
Non-residents will only be required to pay French income tax if the property is being let out and they receive rental income, whether on a long term let or as a short term holiday let or Airbnb. There are several different rental regimes with different tax rules, and since a large number of changes have been made to the regulations, good advice is needed to ensure the right regime is chosen. Tax returns need to be made in May for the preceding financial year (January to December), and from 2019, all tax declarations need to be made online.
Expect to pay 20% on your income. However, if your country of residence has a double taxation agreement with France, that tax can be set off against your domestic tax liability - you won't have to pay it twice.
Capital gains tax
Capital gains tax will also need to be paid when you sell a French property, whether you are resident or non-resident (though again, double tax treaties apply), unless the property is your main residence, in which case it is exempt. As well as the tax, social charges have to be paid, and there is a surcharge on larger gains, amounting to a total rate of as much as 40.5%. However, there is a system of tapered reliefs so that the tax rate declines according to the number of years a property has been held; after 22 years a property is completely exempt from the tax, and after 30 years, from social charges.