Taxes in France
Buyers of real estate in France carefully study the taxation of a potential property owner before making a decision.
Buying property in France you pay:
- registration fees (also called the notary fees) around 7.5 % of the purchase price
- pro rata land tax ( the seller pays this annual tax, but you repay the notary the amount for the current year, calculated from the day of completion).
When you are the owner of property in France:
The owner of real estate in France pays two basic taxes: land tax (taxe foncière) and residence tax (taxe d'habitation).
Taxe d’habitation – a local community tax paid by the owner, or tenant living in the apartment on the 1st January of the current year.
This tax depends on the property and your income in France.
Gradually the residence tax in France is due to be abolished for the main residence.
WEALTH TAX IN FRANCE – The “French exception”
Land tax and residence tax do not put off future buyers of real estate in France.
Most discussion is about the wealth tax called IFI ( Impot sur la fortune immobilière).
The wealth tax, which is quite unusual in other countries, is often referred to as the "French exception" or the "ideological tax."
WHO PAYS WEALTH TAX IN FRANCE
This tax must be paid by both residents and non-residents if their estate assets exceed 1.3 million euros.
Non-residents in France pay the tax only on their real estate located in France.
French residents pay the wealth tax on their worldwide properties after 5 years residency in France, and there is a 30% discount for their main residence.
Wealth tax rates
If your real estate assets exceed 1.3 million Euros, the rates below apply in order to calculate wealth tax payable:
- Under €800,000 : 0%
- €800,001 to €1,300,000 : 0.50%
- €1,300,001 to €2,570,000 : 0.70%
- €2,570,001 to €5,000,000 : 1.00%
- €5,000,001 to €10,000,000 : 1.25 %
The maximum wealth tax rate is 1.5% .
French Riviera buyers usually consider a mortgage, and ownership through a Monaco company (SCI) as basic steps for tax planning in France.
Income tax
Even if you are a non-resident, you have to pay tax from French income sources, such as rentals for example.
If you become a French resident, after 5 years you have to pay tax from your worldwide income.
When you sell property in France
Real estate capital gains tax is the tax paid on the difference between the sale price and the purchase price. For this calculation you add to the purchase price 7.5% registration fees and 15% cost of renovation works (after 5 years of ownership).
Taxation on real estate capital gains comes in 2 parts:
-19 % capital gains
-17.2 % social contribution
Since 2019 people from EU countries pay 7.5% social contribution instead of 17.2%.
Capital gains tax decreases with every passing year, and the seller of property in France will be completely exempt from this tax after 21-22 years.
The seller doesn’t pay the capital gains tax in France, if selling his main residence.
It’s worth noting that the capital gains calculation is based on the property price without the furniture and decorations which are sometimes included in the selling price.
