Fiscality when purchasing a property in France
The French fiscal system can sometimes be complex, especially when it comes to assets like properties.
Whether it is the purchase of a second home or a real estate investment, you should be aware of the French taxes and tax returns to which you will be subject if you are considering buying real estate in France.
A. Registration fees or notary fees
The total fees and taxes payable will depend on the type of property you purchase, whether it is old or new:
- In the case of the purchase of an old property, the total transfer of ownership costs and taxes payable for the purchase of an existing property is between 7% and 10% of the purchase price, excluding real estate agency fees. The amount of registration fees included is 5.80% of the purchase price.
- In the case of the purchase of a property on plan or a property less than 5 years old by a professional, you will pay between 2% to 3% transfer fees and registration fees, plus VAT at the rate of 20% on the purchase price, excluding real estate agency fees. The amount of registration fees included is 0.7% of the purchase price.
These fees and taxes are payable at the time of acquisition to the notary in charge of the sale.
Although these fees and taxes are often referred to as “notary fees”, in fact, the actual notary emoluments are only about 1%. The rest is made of registration fees and government related disbursements.
B. Income taxes
Even if you are a non-resident tax payer, receiving income from a French source, such as rent, gives you the obligation to declare this income and file a tax return in France. There is no reporting threshold, any income must be reported even if it is not taxable.
To determine your tax liability, the French tax authorities will first determine your total income, called your total gross income. They will then make certain adjustments to obtain your net taxable income.
Your French taxes liability will then be calculated gradually, depending on the composition of your household and the level of your income.
Non-residents are subject to a flat rate of 20% or 30% on net taxable income in France.
The declaration is made from April and the tax notice is received at the end of September of the current year.
C. Local taxes
If you own a property in France, you will be subject to two different local French taxes: the housing tax and the property tax.
- The housing tax is an annual tax whose owner is the occupant of the property on January 1st of the year concerned. Even if your property is your second home and you do not physically occupy it on January 1st, you are liable for this tax.
A new tax rebate on the housing tax of your main residence has been introduced as from the taxes established for 2018, second homes but non-residents are not concerned. If you rent this property annually, the person liable for payment is the tenant.
The tax rate is determined by each municipality and can vary considerably. Consequently, the amount of the housing tax depends on the decision of each municipality and the size of the state of the property of which you live in.
If the property is unoccupied, the housing tax is not due. To be considered unoccupied, the property must not be “inhabitable”, i.e., for example, it must not contain any furniture.
- The property tax is an annual tax for which the person liable is the owner of the property, whether or not he occupies the property he holds.
Before buying the property, you should ask your seller, real estate agent or notary for a copy of the property tax notice so that you can estimate the amount.
If you buy a property during the year, the seller is still required to pay the tax for the current year but in practice, an agreement with the former owner regarding the sharing of this tax is put in place.
The Property Tax Notice is received in the third quarter of the year.
D. Tax on real estate wealth (IFI)
If you do not live in France, only real estate located in France is taken into account, subject to the provisions of any tax treaty between your country of origin and France.
The IFI is an annual tax, and the applicable date for asset valuation and household determination is January 1 of each year.
The taxable assets under the IFI are all real estate and investments in real estate. You are liable for this tax if the net value of your property in France exceeds 1,300,000 euros.
The tax rate varies between 0.50% and 1.50% of the declared value of the goods.
The tax return date is usually the end of May of each year.
For any further inquiry, please do not hesitate to contact us.
