Non-residents are taxed in France on income arising from French sources only and are liable to a number of other property related taxes outlined below. Individuals living more than 183 days in France, or whose main resident home is located in France, are considered as French resident for tax purposes. Likewise if your centre of economic interest (business) is located in France you will be deemed resident in France for tax purposes (domicile fiscal). Non-residents may also be liable for tax on the same source of income in their home country of residence, where taxes are levied on worldwide income. Relief for double taxation may apply.
Tax Identification Number
There is no need to apply for a carte vitale if you are not living in France permanently as long as you are not working there. However you will require a Tax ID number in order to file your French Tax Return, even if you are non-resident.
Taxes payable when purchasing a property in France are as follows:
French Land Registry fees are usually 0.615%. In addition there are other purchase taxes e.g. communal tax, departmental tax and levies. Total fees including land registry fees are 5.09% of the value of the property.
The VAT (TVA) rate in France is 19.6% on 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 property taxes payable in France are as follows:
A French Rental Income tax return must be filed by 30th June annually after year end.
Income Tax is levied on income arising in France. For non-resident individuals, income tax is payable at progressive rates on income after allowable deductions for expenses incurred in connection with letting or maintaining the property
Furnished and Unfurnished, leaseback and SCI properties are treated differently for tax purposes.
Unfurnished property is taxed on income less allowable expenses and is regarded as Non-Commercial property (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 Commercial. Non-residents have a choice in the method 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). For income > €32,000, or 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).
French Tax Filing Deadlines:
- 30th April - Leaseback & Furnished Lettings, Corporate Income & VAT Returns (year after income was first received)
- 30thof June - Personal income tax returns, Micro-Regimes (Micro-BIC & Micro-Fonciere,) Unfurnished income tax returns
French Wealth Tax applies to non-residents where the net asset value in France is in excess of €790,000 as at January 1st 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.
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%.
Taxe d’Habitation – paid by the occupant/tenant of the property if rented on a long term (1 year) lease. Otherwise paid by owner.
Ordures Menageres – annual local tax charged separately for refuse collection.
The French Leaseback property scheme was created by the French government to encourage investment and development in tourist regions throughout France. Property bought through a leaseback scheme involves a contract between the investor and a property management company that will manage and rent the property for a fix period of 9 to 11 years. This contract can be renewed at the end of the period should the investor still own the property. The main characteristics of a leaseback scheme are 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 may apply. A French rental income tax return must also be filed annually when purchasing property under the Leaseback scheme.
Other applicable taxes are as follows:
French Capital Gains Tax (CGT) on the sale of property is charged @ 19% 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 if sold 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. Transferring between spouses is exempt from Inheritance Tax.
2011 French Inheritence Tax Rates below:
Table 1: The following table applies to gifts after the tax-free allowance of €80,724 has been deducted:
Between €8,072 and €15,932
Between €15,932 and €31,865
Between €31,865 and €552,324
Between €552,324 and €902,838
Between €902,838 and €1,805,677
Transfers between parents and children:
Below € 8,072
Between € 8,072 and €12,109
Between €12,109 and €15,932
Between €15,932 and €552,324
Between €552,324 and €902,838
Between €902,838 and € 1,805,677
Over € 1,805,677
A €15,932 tax-free allowance is given to transfers between siblings above which the following French inheritance tax rates apply
If resident in Ireland or the UK, you are obliged to declare your French income in your annual resident tax return. There is a Double Tax Treaty agreement between France, Ireland and the UK so relief for certain French taxes will be given against Irish/ UK taxes payable on your French property.
Property Tax International can organise the completion and filing of all necessary French tax returns in addition to advising on your property tax obligations in your home country.
The information provided here is intended as a guide only. While Property Tax International Limited makes every effort to ensure that the information contained herein is accurate, we take no responsibility or liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon.
Property Tax International is a trading name of Taxback Returns which is part of the Taxback Group incorporating taxback.com providing financial services since 1996