Property Tax in France
Property tax in France is one of the most complicated taxes to understand. It is a national tax, meaning it applies across all regions and departments of France.
The French government uses property taxes as a means of raising revenue for public services that are not funded by income or sales taxes, such as healthcare and education.
In this blog post, we will discuss how property tax works in France, why you should care about it, and what other options exist if you want to avoid paying higher rates.
Notary / Registration Fees
The total costs and taxes owing will vary depending on what property is bought.
The entire transfer of ownership expenses and taxes due for the acquisition of an established property is usually 7% to 10% of house price, apart from real estate agency expenditures. The registration fee is 5.80%, with 5.09% in some instances.
In the instance of a professional purchasing a property less than five years old or via a plan (VEFA), transfer and registration costs will be about 2% of the amount transferred, as well as 20% VAT. The registration charge is 0.7% of the total price.
Furthermore, at the time of purchase, all costs and taxes are paid to the person in charge of the transaction.
Although these costs are sometimes called “notary fees,” the real notary fees account for less than 1%, with registration and disbursements accounting for the remaining cost.
The Role of Income Tax
When you get money from a French source, including revenue generated by renting property to others, filing taxes is mandatory. ALL revenue should be reported.
The authorities will begin by calculating the total account of income you received, often known as your total gross income, to determine your taxable income. They’ll then adjust the net amount of taxable income to get your total taxable revenue.
The amount of tax you pay will be determined incrementally as your household changes and your income rises. Non-residents in France are subject to a flat rate of 20%/30% on net taxable income.
The housing tax and the property tax are two separate local taxes that apply to all French citizens who own a home.
1) The housing tax
This is a one-time charge that applies to the resident of a home on January 1st of the year.
A new housing tax exemption has been provided to homeowners who live in their main residence.
Those who live in second homes or are non-residents are not affected by the tax relief. If you rent out the house once a year, the tenant is responsible for the payment.
Each city determines its own tax rate, which can differ widely.
While the calculation approach is supposed to be based on the value on a rental basis, because the values haven’t been updated for such a long time, the amount of tax may no longer be linked to actual rent.
The tax charged on a property varies by municipality and is also based on how big the state in which you live is.
No housing tax is required if the home is unoccupied. In order for a property to be deemed vacant, it must not be “habitable”, which means it shouldn’t contain any beds or chairs.
The audiovisual fee, which was equal to 139 euros in 2019, is calculated and charged based on if any television is owned in any secondary home. This tax must be paid as part of the housing tax.
2) The property tax
This is a yearly tax that falls on the person who owns the property, regardless of whether or not they live there.
The housing tax is calculated as a percentage of the total value on a rental basis, which may or may not link to actual rent. It’s worth asking the seller for a copy of the property tax notice to figure out how much you’ll pay in taxes.
If you buy a home in a year, the seller is still obligated to pay the current year’s tax, although it is typical for the prior owner to agree on how this tax will be split. In order to reassess the property tax, any major development should be reported frequently.
Tax on Wealth Generated from Real Estate (IFI)
Only real estate situated in France is considered, depending on if there are any treaties between France and where you’re originally from.
The IFI is a tax that must be paid once a year, with the beginning date for asset valuation being January 1 of each year.
All of the IFI’s taxable assets are real estate properties and real estate investments. If the total value of your property in France is more than 1,300,000 euros, you are responsible for paying this tax.
The exact tax rate depends on the declared value of goods, but it is usually between 0.50% and 1.50%. The deadline for submitting tax returns is usually the end of May each year.
Need Some Expert Advice?
Elitax, a company specializing in expatriate taxation, can help you with all of your property tax needs. We are a team of bilingual tax consultants who can help you through the entire process. We’ll be happy to help you figure out what needs to be done in order to stay compliant with French tax law.
Get in touch with our advisors for a free 30-minute consultation on +33 (0)1 43 71 10 05
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