Taxes In France
If you own property in France, you will be liable to pay income tax on the income derived from your French property.
In most cases, this income is made up of the rent you receive if you let the property.
French tax laws enable owners of rental property to reduce the amount of taxable rental income through a limited number of deductions that can be taken from annual rental income, for example:
- Repairs and maintenance expenses;
- Real estate taxes;
- Annual interest payments on loans taken out to finance the acquisition of the property and/or deductible expenses.
Taxation conventions exist between France and other countries, which protect you from paying taxes twice. Most bi-lateral tax conventions state that properties that are owned in France will be taxed only in France.
Tax Residence In France
You will be considered a tax resident if you meet one of the following conditions:
- You reside more that 183 days a year in France;
- Your household resides in France;
- The majority of your revenues are generated in France and/or most of your assets are located in France.
If you are a tax resident, your main place of residence in France will be your tax residence and you will be taxed in France on your worldwide income or gains, including on revenues received from abroad. However, taxation conventions protecting against double taxation exist between France and other countries and should avoid you from paying income tax twice.
Real Property Capital Gains
If you sell your French property, any capital gains made will be considered as income and as such will be (in most cases) subject to a tax. There are however situations where capital gains are exempt of taxation, notably if the property sold is your sold is your principal residence.
All home and land owners in France must pay a local real property known as a “taxe foncière”. This tax is based on the rateable value according to the location, the type of building, the surface area and the comfort criteria.
If your home in France is your principal or holiday residence, you will also be required to pay an occupancy tax, or a “taxe d’habitation”. Occupancy tax is based on the rental value of the property defined by the land registry and local authorities.
Whether you are a tax resident of France or not, you may, as the owner of French property, be liable to pay wealth tax in France.
If you are a tax resident, your wealth tax will be calculated on the basis of the net taxable value of your worldwide assets. For non-residents with French property, only assets owned in France are incorporated in the calculations (exemptions exist concerning certain assets).
The net taxable value of assets corresponds to the total value of assets in 1st January of each year reduced by the amount of your debts and liabilities at the same date, for example:
- Taxes still outstanding;
- Outstanding loans, notably mortgages, for the amount of capital outstanding increased by the amount of interest owed and not yet paid;
- Unpaid invoices for works done on your property.
For further information please contact: www.impots.gouv.fr (mot clé: impôt de solidarité sur la fortune).
For precise details on any tax liabilities you may incur in France and/or your home country in relation to your French property, we recommend that you seek advice from an independent tax consultant, the tax authorities or your Notaire.