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Tax implications when investing in a property in France

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In these uncertain political times we can rely on the Benjamin Franklin’s quote, that “In this world nothing can be said to be certain, except death and taxes”. So while Brexit rumbles on, any uncertainly of UK leadership and the exchange rates are simply noise in the property market in France.

If you are planning to invest in a property in France, the taxes you will incur are a complex matter. We will try and make it clearer for you.

Residence Tax

This is essentially an occupier tax, and relies on the property meeting certain standards to facilitate habitation. As the owner of a property, you are liable for this yearly tax known as Taxe d’Habitation. It is due on the 1st January every year, and runs for 12 months. You would be liable to pay this tax yourself unless your property is on long-term let, where the tenants would be liable. Short term or holiday lets on your property are not liable to pay this even if they are in residence on January 1st, as they are not likely to be there for the year.

The amount due is based on a rather outdated measuring scale of notional rental value, rather than actual rental value, held by the local authority. If your property is of high rental value of over €4573 and is your primary residence, you would incur a further 0.2% extra to the amount due, but if it is a second home or owned holiday let that rate is 1.2% between €4573-€7622, and 1.7% for over €7622.

There are reductions that can be applied if there are children resident in the property, and other income based considerations, but this is also dependent on the notional rental value of the property.

If you are purchasing the property part way through the year it is expected that the previous owner will have paid for the year, unless any negotiation is made on this, your first liable tax payment will be the following 1st January.

The expected Tax rate should be part of the property particulars from the agent, if not, it is wise to check with the local authority for it prior to purchase.

Ownership Tax

This tax goes towards local authority services and is based on the size, condition and location of the property. Again it is the notional rental value that is the measuring stick by which they gauge the level, but the assessment is then reduced by 50% to take account of running costs, repairs and insurances.

The notional rental value may not bear any relevance to actual rent achievable for the property. The percentage rent is then applied dependent on the income the authority needs to raise. This is known as taux d’imposition. It will vary slightly depending on whether this is your main home or a second home. There is also no automatic reduction for having children, unlike the Residence Tax.

You may also need to consider that some local authorities make a separate charge for services such as refuse collection. This tax is generally higher in towns than in the countryside, and can differ between regions too.

Selling a property part way through the year still requires you to pay the remaining tax on that property, although it isn’t unusual to negotiate an agreement with the purchasers to share the remaining tax, but this should be incorporated into the sale and purchase agreement.

This tax is levied on all types of property, from residential through commercial and even land (although to a lesser extent). However, there are some exceptions; new builds, additions are exempt for 2 years as long as the works are declared within 90 days of completion. Non-domestic buildings are only partially exempt.

Certain people are also exempt, but it is usually means tested.

When purchasing a property in France, it is important to remember that the taxes are twofold and are Payable for the full year from January 1st. These should always be detailed in the particulars of a property you are viewing, however, there are many variables to the levels you may be eligible for, so always check before purchase.

About Bruce International

Bruce International are a French Riviera property specialist based in Roquefort-les-Pins who offer a range of services including property viewings, purchase assistance and even project and event management!

If you would like to find out about our South of France properties services, please click here.

Tax implications when investing in a property in France

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