France: Property Taxes
Overview
France’s tax system is intricate, characterized by high rates, a complex structure, and significant administrative requirements. With numerous taxes applied to different bases and a variety of exemptions, it can be challenging to navigate. While there are overarching principles, frequent exceptions and adjustments often make the system appear inconsistent. Given this complexity, we have outlined a simplified summary of the tax rates for residents and non-residents. The actual taxation will depend on various factors, including individual financial situations, income sources, and applicable international agreements.
Rental Income Tax
In France, rental income is subject to taxation, with the applicable tax regime depending on whether the property is rented furnished or unfurnished, as well as the taxpayer's residency status. Furnished Rentals: Residents: Income from furnished rentals is taxed under the Industrial and Commercial Profits (BIC) category. If annual rental income does not exceed €77,700, a simplified tax regime applies, allowing a flat 50% deduction for expenses, with the remaining amount taxed under the standard progressive income tax rates. Non-Residents: Rental income is taxed at a fixed rate of 20%. Unfurnished Rentals: Residents: Income from unfurnished properties is classified as real estate income and is taxed under the standard progressive income tax rates. If annual rental revenue is below €15,000, a 30% flat deduction is applied to cover expenses. If it exceeds this threshold, actual costs such as maintenance, local taxes, mortgage interest, and insurance can be deducted instead. Non-Residents: Rental income from unfurnished properties is taxed at a flat rate of 20%. Tax rates and regulations may be subject to change, so consulting a tax professional is recommended for the most up-to-date and accurate information regarding individual circumstances.
<table> <tbody> <tr class="blue-row" > <td colspan="3"><strong>Monthly income, €</strong></td> </tr> <tr> <td>2400</td> <td>6000</td> <td>1200</td> </tr> </tbody> <tbody> <tr class="blue-row" > <td colspan="3"><strong>Tax rate, %</strong></td> </tr> <tr> <td>20.00</td> <td>26.00</td> <td>28.00</td> </tr> </tbody> </table>Corporate Taxation
Corporate tax is levied on various business entities, including sociétés anonymes (SAs), sociétés par actions simplifiées (SASs), sociétés à responsabilité limitée (SARLs), sociétés en commandite par actions (SCAs), and certain cooperatives. In some cases, corporate tax obligations may also extend to sociétés civiles and certain partnerships, depending on the nature of their activities. Currently, the standard corporate tax rate in France is 25%. Companies can deduct income-related expenses, such as operational costs, depreciation, and interest payments, when determining their taxable income. Specific tax regulations may apply depending on the company's structure, revenue, and industry.
Capital Gains Tax
Profits from selling or transferring real estate are subject to income tax, with the taxable amount calculated by deducting the original purchase price and eligible costs from the sale price. Tax reductions apply for properties held long-term: 6% reduction per year between years 6 and 21 4% reduction in the 22nd year After 22 years of ownership, capital gains tax on real estate is fully waived. However, social surcharges of up to 17.2% still apply to profits from property sales. These additional charges gradually decrease over time and are completely eliminated after 30 years of ownership.
Transaction Costs
<table> <tbody> <tr class="blue-row" > <td><strong>Description</strong></td> <td><strong>Cost Range</strong></td> <td><strong>Who Pays</strong></td> </tr> <tr> <td>Property Transfer Tax</td> <td>3.8%-5.81%</td> <td>Buyer</td> </tr> <tr> <td>Land Registration Fee</td> <td>0.1%</td> <td>Buyer</td> </tr> <tr> <td>Legal Fees</td> <td>1%-1.5%</td> <td>Buyer</td> </tr> <tr> <td>Real Estate Agent Fee</td> <td>2%-5%</td> <td>Buyer/Seller</td> </tr> <tr> <td>Notary Fee</td> <td>1%-2%</td> <td>Buyer</td> </tr> </tbody> </table>
Taxe Foncière (Property Ownership Tax)
An annual tax levied on property owners, applicable to both developed (bâtie) and undeveloped (non bâtie) properties.
Calculation:
Base: Determined by the property's cadastral rental value, representing its estimated annual rental income.
Rate: Set by local authorities, typically ranging from 0.5% to 1.5% of the cadastral value.
Exemptions:
Primary Residences: Owners aged over 75 with low income may qualify for exemptions.
New Constructions: May be exempt for the first two years.
Payment: Notices are usually issued in September, with payments due in October.
Taxe d'Habitation (Residence Tax)
Historically applied to all residences, but as of 2023, it has been abolished for primary residences. It still applies to secondary residences and vacant properties.
Calculation:
Base: Based on the property's cadastral rental value.
Rate: Determined by local municipalities.
Exemptions:
Primary Residences: Fully exempt since 2023.
Secondary Residences: No exemptions; tax is applicable.
Payment: Typically due in November.
Impôt sur la Fortune Immobilière (IFI - Real Estate Wealth Tax)
An annual tax on real estate assets exceeding €1.3 million in value.
Calculation:
Threshold: Applies to net real estate assets over €1.3 million.
Rates: Progressive, ranging from 0.5% to 1.5%.
Who Pays:
Residents: Taxed on worldwide real estate assets.
Non-Residents: Taxed only on French real estate assets.
Exemptions:
Professional Properties: Used for professional activities may be exempt.
Payment: Declared and paid annually, typically alongside income tax returns.
Tax regulations can vary based on individual circumstances and may change over time. It's advisable to consult with a tax professional or local tax authorities for personalized guidance.