Guide to French Property Tax and French Taxation ­ Chez Riviera
     
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Oct 31, 2014 

Guide to French Property Tax and French Taxation

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The benefit of owning a property in France brings with it, as in every other country, the burden of taxation. If your apartment is a secondary residence and you wish to use it for holidays, rentals or both, then you will pay less tax than you might think. France's reputation for being a high tax country is primarily related to being a tax resident, which is defined below. Capital gains tax, for example, is taxed at the low rate of 16% for EU residents and it decreases by 10% per year from the fifth year, meaning after 15 years of ownership, no French capital gains tax is due.

Knowing the local administration and taxation systems is vital in reducing your tax bill. A guide to French Taxes, kindly supplied to us by Property Tax International, will give you a good overview of the French system. If you have specific questions not covered in the article or if you would like some advice on French Taxes, Property Tax International can assist you.

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French Property Tax Fact Sheet

Non Residents

Non-residents are taxed in France on income arising from French sources only and are liable to a number of other property related taxes outlined below. Individuals living more than 183 days in France, or whose main resident home is located in France, are considered as French resident for tax purposes. Likewise if your centre of economic interest (business) is located in France you will be deemed resident in France for tax purposes (domicile fiscal). Non-residents may also be liable for tax on the same source of income in their home country of residence, where taxes are levied on worldwide income. Relief for double taxation may apply.

Tax Identification Number

There is no need to apply for a carte vitale if you are not living in France permanently as long as you are not working there. However you will require a Tax ID number in order to file your French Tax Return, even if you are non-resident.

Income Tax (Impot sur le Revenu)

Income Tax is levied on income arising in France. For non-resident individuals, income tax is payable at progressive rates, but is usually at a minimum of 25% (20% from 2006) on income after allowable deductions for expenses incurred in connection with letting or maintaining the property.

Furnished and unfurnished properties are treated differently for tax purposes. Income from unfurnished property is treated as non-commercial income whilst income from furnished property is treated as commercial income.

Unfurnished property - Income from land or unfurnished buildings is taxed on income received less allowable expenses including mortgage interest and depreciation.
Non-resident individuals, where income < €15,000, can benefit from a simplified scheme called Micro-Fonciers whereby a deduction of 40% (30% from 2006) for related costs is permitted in arriving at taxable income. You can opt out of this simplified scheme if you wish.

For income above €15,000 (or if you choose to opt out of the simplified scheme), tax is calculated on an actual receipts/costs basis.

Income from furnished property is treated as commercial income Non-resident individuals, where income < €15,000, can benefit from a simplified scheme called Micro-Bic whereby a deduction of 72% (68% from 2006) for related costs is permitted in arriving at taxable income. No further deduction is permitted for costs. For income above

€15,000 (or if you choose to opt out of the simplified scheme), tax is calculated on an actual receipts/costs basis.

Other income eg French deposit interest or income from Life assurance policies is either taxed at source or exempt - please Contact us for further details.

For a married couple income tax is generally assessed by reference to the income of the household rather than on your sole income. Unmarried couples are assessed as two households.

Tax Returns must be submitted by 30 April each year following the respective tax year. The tax year runs from 1 January to 31 December.

Deemed Rents (N/A to Irish Resident Individuals)
Non-resident individuals who have French property available for their use are assessable to French income tax on deemed rents. The taxpayer's income is deemed to be three times the property's real rental value. In general this value is calculated as 5% of the capital value of the property.

Taxpayers are exempt in the following cases:

  • There exists a Double Tax treaty between France and the taxpayer's home country. There is such an agreement between Ireland and the United Kingdom & France.
  • When the taxpayer's actual French income exceeds the deemed income.

Wealth Tax (Impot de Solidarite sur la Fortune)

Non-resident property owners are also liable to wealth tax on gross asset values in excess of €720,000 (€732,000 from 2005). Wealth tax is a direct tax levied on your net assets (car, property, bank accounts etc) located in France as at 1 January each year.
Tax rates depend on the type of property (antiques & works of art are exempt) and range from 0.55% to 1.8% of the value of the property. A deduction against this value is allowed for any outstanding debt (capital) on the property. The Return must be filed before 15 July each year.

Local Taxes (Taxe Fonciere & Taxe d'Habitation)

There are three local taxes payable:

Taxe Fonciere, is paid by the owner of the property, irrespective of who occupies it. If you sell the property part way through the year the tax will be apportioned by the notary dealing with the sale. It includes a tax on buildings (excluding barns and inhabitable buildings) and a tax on land. New houses used as your home are exempt from taxe fonciere for the first 2 years.

Taxe d'Habitation, is paid by the occupants of residential property on 1 January and is not apportioned if the property is sold later in the year. This tax is assessed on the notional rental value of the property and is set by the local land registry (cadastre) and can vary per region.

Ordures Menageres, this is an annual local tax charged seperately for refuse collection.

Tax on French Real Estate owned by a company, French property can be held in either a French company (Regular or SCI) or a Non-French company. If held in a French company, income arising from property within the company is subject to French

Corporation tax on profits:
a) Corporation tax (IFA Impôt sur les sociétés)
Currently there is a flat tax rate of 33.33% on profits on companies.
For qualifying small-medium companies, there is a reduced tax of 15% on the first 38,120 Euros of profit. In order to qualify, the share capital of the company should be fully paid up and at least 75% of this share capital should belong to physical persons.
French company tax is payable on account with at payments due on a quarterly basis.

b) Annual minimum tax payable
IFA (Imposition forfaitaire annuelle)
Regardless of whether a French company makes a profit or not, it is assessable to a minimum tax which is calculated in reference to its turnover. Rates are as follows:


Turnover (Euros)

Maximum tax payable (including corporation tax)

0 - 76,000

0

76,000 - 150,000

750

150,000 - 300,000

1,125

300,000 - 750,000

1,575

750,000 - 1,500,000

2,175

1,500,000 - 7,500,000

3,750

7,500,000 - 15,000,000

15,000

15,000,000 - 75,000,000

18,750

75,000,000 +

30,000

The IFA is payable each year by 15th March.

Also property can be purchased in France through a special type of company, societe civile immobiliere (SCI). The company is not taxed as a company but it's assets and benefits are treated and taxed as those of its owners (similar to a Partnership in Ireland). This tax treatment only applies to non-commercial property (eg unfurnished property). Legal advice should be taken before deciding which ownership structure best suits your requirements.

Property Holding companies
(Taxe sur les Immeubles....Personnes Morales)

Companies which hold french property are liable for tax at 3% of the value of the real estate held, with no deduction for any debt outstanding. It is based on the market value and not the lower cadastral value.
This tax was introduced to ensure that property holding companies (in particular those in 'tax havens') are subject to French tax.
However, there are exemptions to this tax, particularly if provision for exemption is made under a double taxation agreement - please Contact us for further details.

Capital Gains Tax (Plus-values)

Capital gains tax is payable by non-residents at 16% of the gain made on the sale of your French property if you live in the EU (33.33% if outside the EU).
The taxable gain is calculated on the difference between the sale and acquisition value.
The sale value is the actual selling price, decreased by the costs and taxes, paid upon the property transfer. The acquisition value is the actual amount the property was transferred for (registered transfer price) plus expenses and taxes (excluding interest) paid on acquisition. This value is subject to indexation set by the French Tax authorities. There is a reduction factor applied of 10% for each year that you have owned the property after the first five years. After 15 years, there is no CGT. The gain is collected as a withholding tax taken at the time of sale by the Notary. To recover any overpaid tax, you will need to submit a Tax Return.

Capital gains tax also applies to the sale of shares held in a company (French or otherwise) whose assets comprise of more than 50% land & buildings located in France.

Land Registry fees & VAT  

Land registry fees at 4.89% are payable on purchase of a property.
A new/off the plan property is subject to VAT @ 19.6% (TVA in France). However in a sale & leaseback arrangement, it may be possible to claw back the VAT that would otherwise have been payable.

Gift Tax (Droits de Donations) & Inheritance Tax (Droits de Succession)

Gift & Inheritance tax is payable by non-resident beneficiaries on any assets located in France. The tax payable will depend on a number of factors - the inherited amount, the relationship between the deceased/donor & the beneficiary, the number of children and in some cases the level of gifts enjoyed in the previous 10 years. For joint ownership, differences also arise depending on whether you purchase under (1) Separate ownership (en indivision) or (2) Joint ownership (en tontine).
This can be a costly expense to acquiring a property and sound tax & legal advice should be sought.

Worldwide income

If resident in Ireland or the UK, you will be obliged to declare and file your French income in your home country of residence (UK or Ireland) also. There is a double taxation agreement between France and Ireland so relief for certain French taxes will be given against your UK and Irish taxes payable on your French property.

Property Tax International can organise the completion and filing of all necessary French tax returns in addition to advising on your property tax obligations in your home country.
Please also Contact us if you require assistance with organising Bank finance or opening a French bank account.

Specific queries regarding property-related taxes in France can be addressed to:

Brid Doherty on + 353 56 7794 558

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