The content of the article
- How much is the property tax in France
- Registration fees
- Land tax
- Accommodation tax
- Tax on second homes
- Luxury tax
- Property rental income tax
- The tax on unoccupied housing
- Tax in the amount of 3%
- Capital gains tax on the sale of real estate
- Inheritance tax on real estate
- How to pay property tax in France
Owning real estate in France and making a profit from it from renting is directly related to a number of rules and obligations to the administrative tax apparatus of the state. Private property in France is reliably protected by law. If you are a non-resident, but own property in France, you need to pay taxes related to real estate, as well as income tax on profits from real estate received in the country.
How much is the property tax in France
In France, there are a number of taxes related to the ownership of real estate. Almost every housing transaction, such as the purchase, sale or transfer of property, will involve the payment of tax in favor of the state.
Registration fees
If you decide to purchase real estate in France, then a notary will handle all documentation, registration in state registers, communication with the city administration and banks. The entire amount is transferred to him from the account to pay for housing at the time of registration and conclusion of contracts, and later he transfers it to the seller after the transaction is completed.
Registration fees are a mandatory expense item for the purchase and sale of real estate in France. They consist of:
- notary expenses (from 2.5% for primary and up to 7.5% for secondary housing);
- request to the cadastre;
- request for urban planning documents;
- clearing property from encumbrances;
- registration of rights to real estate (0.1%);
- directly “registration fees” (0.715% for primary and 5.09% for secondary real estate);
- other administrative expenses.
By law, this event is equated to an increase in fixed capital and is taken into account when selling real estate.
Land tax
After purchasing a property, you must pay property tax (taxe foncière) annually, regardless of whether you live in France or outside it.
The rate of this tax is dynamic and is determined by local authorities. The basis of taxation is the cadastral value of rental housing: 50% of the cadastral rental value for built—up areas and 80% for undeveloped ones.
The factors on which the rate depends are the area of housing and the region where it is located. In general, the more developed an urban district is, and the more businesses are located in it, the lower the real estate tax rate.
Built-up and undeveloped areas may be exempt from paying property tax:
- owned by the state;
- religious institutions that have access to them;
- having buildings used in agricultural activities;
- having plantations of truffles and walnuts;
- with some social housing;
- with new buildings for a limited period of time.
Persons over the age of 75 with low income or receiving benefits may also be exempt from paying tax.
An example of calculating a real estate tax:
The apartment has an area of 80 sq. m. meters in Antibes, 100 meters from the coast with a cadastral rental value of 10.42 euros per square meter. a meter, theoretically, can be rented for 833.6 euros per month.
The annual rental revenue will be 10,003.2 euros. The tax base will amount to 50% of the annual revenue, that is, from 5001.6 euros.
Administrative payments will amount to: municipal tax — 12.53%, departmental tax — 12.42%, special tax — 0.205%, garbage collection tax — 9.5%, administrative expenses — 60 euros. In total, you will need to pay 1,792.75 euros in total.
Accommodation tax
The residence tax (taxe d’habitation) is paid directly by the person who lives in the purchased property. If the property is bought for rent, then the tenant pays for it. The rate is also determined by the local authorities and depends on the well-being of a particular city.
The innovation of 2023 was the abolition of this tax for all households whose real estate is considered the main place of residence.
However, the tax is retained for all non-core household properties. If the owner of the property does not live in it permanently and does not rent it out for a long time, then he pays the tax, which is calculated at the tax rate on the second home.
Tax on second homes
The second home tax is another name for the residence tax, which is currently required to be paid only by those for whom real estate is a “second home”, or not the main place of residence:
- in the case of long-term rental of your property, you do not need to pay tax;
- in case of short-term rental, the tax is included in the cost of the tenant’s stay (paid by the tenant);
- if you use your second property as a vacation residence, the tax is paid in full annually.
The tax on second homes is calculated on the basis of the cadastral value of the lease. The price is updated every year. To calculate the amount, it is necessary to multiply the rental cost by the tax rate, which varies between municipalities.
Exemption from tax on second homes is provided in the following cases:
- the professional activity is located near the “second home” and requires the investor to live there, not in the main house;
- The main place of residence is a nursing home;
- the main residence is uninhabitable.
Luxury tax
If the value of the purchased property exceeds the established limit of 1.3 million euros, French law provides for the deduction of the luxury tax IFI (impôt de solidarité sur la fortune), also known as the real estate tax, at a progressive rate of up to 1.5% of the cost of housing. Apartments, private houses, garage and utility blocks, as well as land plots without buildings are considered real estate for this tax.
When calculating the luxury tax, it matters whether you have French residency and when it was obtained.
- Persons whose center of economic activity is located outside France, and who are tax residents of another country, must pay luxury tax only for their real estate located in France, the amount of which exceeds the specified limit.
- If you have just received French residency and were a resident of another country in the previous 5 years, then you will have to pay tax only for property in France before the expiration of the five-year period.
- After the end of five years of residence in France, you will need to pay luxury tax in the same way as citizens of this country: all real estate around the world is subject to taxation.
There is a legitimate way to avoid paying luxury tax in France by having a residence in the country, namely, to register your property with a legal entity, the family company SCI, where family members will have shares not exceeding the 1.3 million euro limit.
Property rental income tax
When planning to make a profit from real estate in France, it is worth considering the division of categories of premises intended for rent from the point of view of taxation (Impôt sur le revenu).
The main parameter of the division is the presence or absence of furniture from a special list in the room for rent. Among the main items on this list are bed linen, kitchen utensils and cutlery, a lighting system — that is, what makes the room comfortable for a long stay in the household plan.
In the complete or partial absence of items from the list, housing falls into the category of “unfurnished”, and income from renting it out will be subject to simple income tax at a progressive rate. At the same time, there is a difference in the declaration process and the right to tax deductions, depending on whether the annual rental income exceeds the amount of 15 thousand euros.
If the apartment has the entire list of items that characterize it as “furnished”, then the income from such a lease is taxed on industrial and commercial profits (BIC). Renting an apartment can be classified as professional and unprofessional. Two main differences between the categories: it is considered that you rent an apartment for non-professional (micro-mode) rent if:
- the annual income from this activity of all members of your household is less than 23 thousand euros;
- the income from renting a furnished apartment is less than the total amount of other income of your household.
In all other cases, the lease will be considered professional, and the real tax regime will be applied. The amount of tax is considered a coefficient at a progressive rate depending on the amount of total income.
The tax on unoccupied housing
In some regions of France, the government is stimulating economic development by introducing a tax on unoccupied housing (la taxe sur les logements vacants) for unfurnished premises that have been empty for more than a year. In such cases, the owner will have to pay a tax of 12.5% of the cadastral value of the lease after one year of downtime of the property and 25% each subsequent year.
Tax in the amount of 3%
France provides for a tax equal to 3% of the market value of a building owned by French or foreign legal entities.
Capital gains tax on the sale of real estate
The difference between the purchase and sale value of real estate is considered an increase in capital and is taxed under French law (Plus-value immobilière).
The capital gains tax consists of two parts:
- Income tax on the amount of profit.
- Social charges.
The amount of the bid depends on whether you are a resident of France at the time of the sale. If your place of residence is France, the rate will be 19% of the profit for income tax and 17.2% for social charges.
For non—residents, the income tax rate in France is 30%, and the percentage of social charges is determined by an international tax treaty.
There are many tax benefits and exceptions to reduce income tax:
- Thus, for residents of France, capital gains tax is not required to be paid if the property was the main place of residence (the amount of days spent in the country in a year exceeded the number of days spent in other places).
- In the absence of residency, housing is considered a secondary place of residence and tax must be paid.
After 5 years of real estate ownership, income tax rates and social charges will gradually decrease.
So, after 22 years of ownership, profits will no longer be subject to income tax, and after 30 years of ownership, you will not need to pay a social fee.
Inheritance tax on real estate
When transferring rights to real estate to heirs, it is necessary to take into account the rules of inheritance taxation in France.
The tax (l’impôt sur les successions) is required to be paid by resident heirs who have lived in the country for more than 6 years. It must be paid even if the inherited property is located outside France.
The difference in taxation for resident and non-resident heirs:
- if the inheritance is received by a non-resident, then only objects within the country are taxed;
- if the heir is a resident of France, real estate outside the country is also taxed.
The tax rate is progressive and depends on family ties. The primary right of inheritance is held by the spouse, who is exempt from paying tax. Next, the priority of inheritance goes to children, for whom the tax rate varies from 5% to 45% of the cost of housing. If the person is not a relative, the rate is increased to 60% of the cost.
To reduce inheritance taxation and simplify the procedure, it is possible to arrange the purchase of real estate in France for a legal entity SCI — a family company. The legislation provides for heirs to receive large tax benefits every 15 years.
How to pay property tax in France
In the first few months after obtaining French residency or buying real estate, you need to contact the local tax authorities yourself and take a form for registration. When filling out, it must be indicated that the tax return is being submitted for the first time.
It should be borne in mind that in France they file one declaration for their household, taking into account all the joint incomes of all family members.
Next, you must personally transfer it to the tax service. After registration in subsequent years, personal presence is not required, you can make declarations online in your personal account. For the first time, the payment must be made in full, and further funds can be deposited in three stages.
When declaring income, it is important to enter information on all sources of profit in and outside France, including salary, rental income, and interest on securities. The declaration should be submitted even if you did not have any profit for this year — in this case, it is filled out taking into account these data.
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