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Owning a property in France is the perfect combination of a beautiful estate and a remarkable quality of living, with fantastic food and astonishing, rustic sights.
France is one of the most attractive tourist and real estate investment destinations for non-residents in the world.
However, the taxation, administrative and legal constraints are all subjects of concern to non-residents and investors.
The purchasing of a property raises many questions about the tax consequences of acquisition and the procedures and multiple stages of acquiring real estate in France.
This is an overview of France real estate taxes for an individual neither resident nor domiciled in France who acquires, holds and/or disposes of French real estate.
1. Property Tax
Once you buy a property in France, whether built or not, you automatically become liable for the land or property tax. The tax is calculated annually by the public authorities according to the cadastral rental value of the property and the rate determined by the local authorities.
The property tax is generally paid in October. The specific deadline for payment varies depending on the method of payment chosen (by post, on the internet or by monthly payment).
2. The rental value, the taxable income of any owner
This section corresponds to the income that can be derived from the rental of the property. It is therefore important to calculate a theoretical value for the property. Many criteria are taken into account for this estimation, such as rents on the commune, the surface of the property, the number of rooms and the geographical location, etc…
If rented, the revenue gained from rentals must be reported to the tax authorities in the property income category. They include the investor’s taxable income after deducting certain expenses. The taxable amount is determined by the difference between the gross income from rentals and total costs of the property.
Note that the this taxable ‘real estate’ income for all owners is such that there are, in return, possible deductions for calculating tax income. The maintenance, operating and administration costs of a property may also be deducted.
3. The wealth tax (ISF)
Owning a property in France has consequences on private wealth. The solidarity tax on wealth (or, suitably named the ‘wealth tax’) is due when the net assets of a tax household amount to more than €1,300,000. To read further about the wealth tax, consult our blog for a concise and simple guide.
If you require a more in-depth guide, please consult Cabinet Roche’s guide on ISF.
4. Transfer and real estate gains tax
- Transfer taxes: also known as ‘notary fees’, they apply to almost all transfers for valuable consideration relating to real estate, including all purchases or sales of dwellings. Withheld by the notaries, on behalf of the French tax authorities, they accompany the transfer of the ownership of a land or a building.
- The real estate gains tax: is taxed on the gain realised by an owner at the time of the resale. Obviously paid by the seller, this tax is complex to calculate since it is is based on the gain realised but also on the duration of ownership of the property concerned.
Whether it is the property tax, rental value, solidarity tax on wealth or the existing duties and taxes on a resale of property, owning a property in France can be a costly investment. Consultation is likely well-needed, to guide you on making the most out of your investment.
Visit http://www.cabinet-roche.com/en/ .