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Paying Taxes on Residential and Investment Properties

Following changes to the taxe du2019habitation last year, your property tax liabilities will depend on whether you own a French home as a primary residence or have a property that you rent out, either all or some of the time.

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Paying Taxes on Residential and Investment Properties

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  1. Property Tax in France Paying Taxes on Residential and Investment Properties

  2. INTRODUCTION All foreign nationals must understand the French taxes they may be liable for when purchasing or selling a property, paying tax against rental earnings, and calculating potential wealth tax obligations. Here we will discuss, all the property taxes in France you may be expected to pay, who they

  3. Taxe Foncière: The Local French Property Tax • The first tax scheme is the taxefoncière – a tax all homeowners usually pay, calculated against a notional rental value of the property • Residents who are over 75, live in the home as their primary residence, and either receive qualifying state benefits or have a low income are exempt from the taxefoncière. • New build properties are often exempt for the first two years.

  4. Paying French Taxe d’Habitation on a Second Home or Holiday Residence • Reforms introduced in July 2023 mean this tax is now payable only on properties that are not the owner’s principal residence. The calculation works similarly to the taxefoncière, using a notional rental value. • Most second homeowners pay a rate equivalent to that owed through the taxefoncière system, although there are thresholds and exemptions, which mean the tax charge may change. • Rental income earned from a French property will normally be taxable at the standard income tax rates, beginning at 11% for annual earnings of over €11,294 (£9,669). Higher-income tax rates of 45% apply to incomes over €177,106 (£151,620) with additional social charges of 17.2%.

  5. Cotisation Foncière des Entreprises (CFE) Tax on Furnished Rental Properties • CFE is a tax levied against homeowners who let out a furnished property as a business activity. Translating to a ‘property tax on companies’, CFE is paid annually and, as with the previous two tax categories, is calculated based on the property’s rental value. • Owners of furnished rental properties who earn under €5,000 (£4,280) a year can normally claim an exemption. • *Note that second homeowners with an unfurnished holiday home or rental property are not subject to CFE charges.

  6. Understanding French Wealth Tax on Property Ownership • The French tax system levies an annual wealth tax based on the value of your property portfolio, called the Impôt sur la Fortune Immobilière or IFI. • If you own real estate assets worth €1.3 million (£1.11 million) or more, you may be liable, although properties are assessed for IFI from a value of €800,000 (£685,000) and above – anything below this is not taxable. • IFI tax rates depend on the total valuation, with most affluent property owners subject to a 0.5% tax rate on properties worth up to €1.3 million (£1.11 million), with progressive increases up to an upper limit of 1.5% for property assets worth €10 million (£8.56 million) or more.

  7. Understanding French Wealth Tax on Property Ownership Cont… • Non-residents with properties in France may be required to pay IFI, although only real estate within the country is assessed • Foreign nationals who are new residents in France and who were previously domiciled in another country will be assessed for IFI solely on their French properties for the first five years – after that, all global real estate assets are included in the calculations.

  8. Capital Gains Tax on Properties in France • The French capital gains tax system exempts primary homes, so if you own a principal residence in France and live there at the time of sale, you will not usually incur a capital gains tax charge. • Other property assets may attract a capital gains tax liability on the value earned in excess of the original purchase price. • Capital gains tax charged on property sales is capped at 42.2%, and property owners who make a taxable gain at the point of sale but have owned the real estate for a significant period can claim tapered relief. • Further, social charges drop after five years of property ownership and are not payable if you have owned the property for 30 years or longer.

  9. Calculating French Property Tax Liabilities as an Expat Owner • Some of these tax charges may depend on whether you are a French tax resident or a British tax resident who spends some of the year in France but lives primarily in the UK. • Broadly speaking, British nationals are liable for taxefoncière, capital gains taxes, income taxes on French rental incomes, the IFI wealth tax, and the taxed’habitation on a second home. However, they may be able to pay a reduced social charge rate of 7.5% if they hold an S1 healthcare certificate.

  10. For more information about property tax in France, how these apply to your real estate ownership, and factoring in these costs, please contact the Chase BuchananBordeaux team. Information Source:- https://chasebuchanan.com/property-tax-in-france-residential-investment/ Thank You

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