Non-residents are liable to pay tax on income derived in France in addition to paying property related taxes detailed below. An individual is considered tax resident for taxation purposes if they spend 183 days or more in France, or whose main residence is located in France. Similarly, if your centre of economic interest (business) is located in France you will be considered (domicile fiscal) or resident in France for Tax Purposes.
Non-resident property owners may be liable to declare French sourced income as worldwide income within their resident tax return in their home country.
If you do not live in France permanently you will not require a carte vitale. A French tax ID is required to file a French income tax return.
Taxes due when buying a French property:
Land Registry fees in France are usually 0.615%. Additional taxes due at purchase include: departmental tax, communal tax and levies. Total fees including land registry fees are 5.09% of the value of the property.
The TVA (Vat) rate in France is 19.6% payable on certain property purchases. It may be possible to claim this back where a leaseback agreement is in place. A rate of 5.5% applies to rents.
Ongoing taxes payable in France:
30th June – Deadline for filing annual French income tax return.
Non-residents are liable to a progressive rate of tax on income derived in France. Deductions are allowed for costs incurred in connection with the property.
Leaseback, SCI, Unfurnished and Furnished properties are treated differently for tax purposes.
Unfurnished property is regarded as a Non-Commercial property and is taxed on income less allowable expenses under the (Regime reel des revenues Fonciers). Non-residents can benefit from a simplified scheme (Regime du Micro Foncier) – where income is < €15,000, a deduction of 30% for related costs is permitted in arriving at taxable income which is levied at a flat rate of 20%.
Furnished property is treated as a Commercial activity. Non-residents can choose which method of taxation they use. Where income < €32,000 a deduction of 50% (71% for 2008 and previous years income) for related costs is permitted in arriving at taxable income and net income is levied at 20% (Micro Regime). Where you choose to opt out of the simplified scheme, tax is calculated on an actual receipts/costs basis and gross income is levied at 20% (Regime Simplifie d'imposition) for income > €32,000.
France - Tax Filing Deadlines:
30th April - Leaseback & Furnished Lettings, Corporate Income & VAT Returns (year after income was first received)
30th of June - Personal income tax returns, Micro-Regimes (Micro-BIC & Micro-Fonciere,) Unfurnished income tax returns
French Wealth Tax is calculated as at January 1st each year and applies to non-residents where the gross asset value in France is in excess of €790,000 for 2010 (€790,000 for 2009 and €780,000 for 2008).
3 Local property taxes apply in France:
These are based on the rateable value of the property and vary per region.
1. Taxe Fonciere
Generally paid by the owner of the property (though it can be arranged to be paid by occupant/tenant). It includes tax on land/buildings. Allowance available depending on property type of between 20% and 50%.
Paid by the occupant/tenant of the property if rented on a long term (1 year) lease. Otherwise paid by owner.
3. Ordures Menageres
Annual local tax charged separately for refuse collection.
The French Leaseback property scheme was set up initially to encourage development within existing and upcoming tourist areas throughout France. The buying process involves a contract between the investor and a property management company who will manage and rent the property for a fix period of 9 to 11 years. Contracts can be renewed at the end of the period should the investor still own the property. The main characteristics of a leaseback scheme is that the property must serve as a holiday accommodation for at least 20 years and where a French VAT is charged on the purchase price of the property it can be claimed back. In this case, you need to account for 5.5% VAT on the rental income. French rental income from a leaseback contract under € 80,000 pa falls under the Regime Simplifie d’imposition (BIC) and full deductions on costs incurred and property depreciation allowance can apply. A French VAT, French rental income and corporate income tax return must also be filed annually.
Additional Taxes in France:
French Capital Gains Tax (CGT) is charged @ 16% of the gain if you live in the EU (33% if outside the EU). There is a reduction factor applied @ 10% for each year that you own the property after the first 5 years. No CGT is payable after 15 years.
French Inheritance Tax (IHT) is payable by non-residents depending on a number of factors – the inherited amount, the relationship between the deceased/donor & the beneficiary, the number of children and in some cases the level of gifts enjoyed in the previous 6 years.
Non-Resident property owners may be liable to declare French rental income as worldwide income within their annual tax return.
Irish and UK residents are obliged to declare French sourced income in their annual resident tax return. There is a Double Tax Treaty agreement between France, UK and Ireland so relief for certain French taxes will be given against UK/Irish taxes payable on your French property.
Property Tax International specialise in the completion and filing of non-resident French income tax returns. PTI also provide a complete range of Irish and UK domestic tax filing services for the self-assessed and self-employed.