Taxation and Charges
Wealth Tax (ISF)
French wealth tax or Impôt de solidarité sur la fortune (ISF) is payable by individuals who are resident in France who have NET global assets €1.3 million as of 1st January every year. It also applies to individuals who are NOT resident in France but who have net French based assets (French banks accounts, investments or property) above €1.3million.
The sum total includes any assets that are held by children under 18 in a family. Companies are never subject to this although individual shareholders will be. Existing debts on the 1st of January can be offset against assets for tax purposes. For example a loan secured on a French property at the time of purchase can be offset.
Those who run a professional lettings business with a furnished property may be exempt under the professional assets category.
We strongly advise you to seek advice from a professional tax advisor regarding your personal position with French Wealth Tax. Ask your Chez Riviera agent to put you in touch with the local experts
French inheritance law and tax are likely to apply to those having properties situated in France even if they are resident or domiciled elsewhere in the world.
French law has the concept of protected heirs which means that children are entitled to an equal part of the deceased’s estate. These beneficiaries cannot be disinherited. A recent development allows for French resident foreigners to elect the law of their country of nationality in choosing who receives their estate. This does not apply to UK residents, for example, who must still follow French inheritance laws. It also does not change the taxation of the inheritance, just who it is passed to.
A Will can be either French or English (or both) but must be expertly drawn up so that it will have full effect in any other jurisdiction. If you are considering moving to France, eventually, it may be possible to change marriage contracts at the time of purchase to maximize control of the inheritance of the property. It may be beneficial to purchase the property through a company in order to preserve inheritance flexibility and gift allowances.
It is essential that you seek the advice of a Notary or a qualified advisor before the completion of a sale/purchase.
For more information on inheritance laws in France please contact us or seek advice from your notary.
All income generated in France is subject to French income tax. There are different tax rates depending upon the amount of income generated, the person or company owning the property, whether the property is furnished or unfurnished etc. It can only be assessed on a case by case basis.
In certain circumstances Social charges are payable, though if your social security is taken care of by another EU state (e.g. NHS in the UK) then you may be entitled to a refund of social charges paid in 2013 and 2014. Your claim must be done before the end of 2015.
We will be happy to put you in touch with qualified advisors so please send us an email.
Capital Gains Tax
There is no capital gains tax to pay on the profits from selling your French Property if you can prove that the property is your principal residence and it is held in your personal name.
If the property is a second home, there is a progressive tax deduction which means that you need to wait for 22 years until your property is free of Capital Gains Tax (and free of social charges after 30).
If you are non-French-resident but living in a country in the EEA (eg UK residents), the capital gains tax rate is 19% on rent from secondary homes in France. If the tax payer is not in the EEA then a 33.3% rate is imposed.
If your social security is taken care of by another EU state (e.g. NHS in the UK) then you may be entitled to a refund of social charges paid in 2013 and 2014 if you sold a property in this time. Your claim must be done before the end of 2015.
For French-residents the rate is 19% plus 15.5% social contributions (34.5%)
There are also addition taxes for large gains over €50 000.
The gain is calculated on the difference between the sale price and the original purchase price. In addition to the purchase price certain costs such as some major home improvements can be deducted. Only home improvements carried out by a registered professional can be taken into account.
After 5 years, the owner can ‘increase’ the original purchase price by 15% to account for improvements and expenses even without justification.
For more information on CGT we advise you to contact a qualified financial body or your notary. If you would like us to put you in touch with one then please do contact us.
This is known as the “Fonds de Roulement” and if you purchase in a copropriété (an apartment block or a villa in a domain with communal facilities) you may have to contribute to this fund which is used to cover exceptional costs such as the emergency repair of a lift, leakage repairs, changing of entrance doorway etc. It is generally a set sum which is due three times per year. The manager of the property will give a breakdown of sums spent once per year and refund any remaining money. When an apartment is sold, the ‘syndicat’ (property manager) will refund the seller their share of outstanding money remaining in the sinking fund and the purchaser will be expected to contribute this amount back into the fund. The Notary should let you know how much is owed in advance. However, it is always worth posing the question to the Notary or the estate agent.
If you purchase an apartment in a residential block, or a villa in a domain you are likely to be liable for “charges de copropriété” or condominium charges, which tend to be monthly charges to cover maintenance of communal facilities, the guardian’s wage, insurance etc. Older style blocks without lifts in the town centre may have very low charges of around 50 Euros per month (sometimes even less in the Old Towns), while others may be around 120 Euros but include hot and cold water and heating. Highly luxurious blocks with 24 hour security, parkland, pools and tennis courts may charge many hundreds or even thousands of Euros per month. So it is always worth asking what the charges are if any.
This tax is paid by the person who occupies the property on the 1st of January each year, with the exception of short term rental tenants. This tax is probably the nearest equivalent to UK council tax. The Taxe d’habitation is also assessed using the cadastral value. The property has to be habitable, so if it can’t be occupied due to lack of water/electricity or due to substantial renovations it will be exempt from tax during that period. If you are the owner and are deemed to be in occupation i.e. the property is not rented out long term, then you are liable to pay this tax even if you do not use the property at all. It is usually more or less equivalent to the Taxe Foncière. For example, for a one bedroom flat in Cannes or Nice you can expect to pay around 600 to 800€ (and more) per annum.
This is a tax paid by the owner of the property. The charge is based on the notional rental value – the cadastral value – which is assessed by the local authority on the 1st of January each year. New Build properties can benefit from a reduction or exemption from this tax, as can properties which have been substantially renovated. You will be charged on a yearly basis for this tax which is generally very affordable; for example you can expect to pay around 750€ per annum for a one bedroom flat in Cannes centre.
When you sign the final exchange at the Notaries’ office, the seller will have already paid this tax for the whole year ahead. You will therefore be required to refund – on a pro-rata basis – the amount of this yearly tax to the seller. For instance if you sign for a property in June, the Notary will calculate the value of 6 months’ tax and you will be expected to refund this amount.
Fiscal Representation tax
Overseas residents selling their properties will also have to pay a Fiscal Representation tax which is around 0.65-1% of the full sales price of the property if the price is over 150 000 Euros. Your Chez Riviera representative will put you in charge with an organisation who do this calculation for you. Remember this is only applicable when you are SELLING your French Property and not when you are buying
Please feel free to ask your Chez Riviera agent to put you in touch with a trusted financial advisor.