French Real Estate Taxes
Transfer Tax
A transfer tax of 7.5% is levied on the sale of real estate. (This can be less than 1% for new properties.)
Government Tax
The French government charges a tax for registering a mortgage or loan on your property. The fee depends on the amount of the loan.
Property Tax
Annual property taxes consist of the taxe d’habitation (paid by owners-occupiers and most long-term rental tenants) and the taxe foncier (real estate tax). For a studio or one-bedroom apartment in most cities, taxe d’habitation is around $240. The calculation formula is quite complex and varies depending on whether the property is your primary or secondary residence. Secondary residences are taxed at a higher rate. The taxe foncier is based on the value of the apartment. It takes into account the age of the building, the area of a city, and the size of a property. For example, a 215-square-foot studio in an older building in the Marais (3rd arrondissement) of Paris has been assessed at $205. The taxe foncier for a 535-square-foot, one-bedroom apartment in an older building in the 5th arrondissement is $240. For a small village house in mainland France, your combined bill for the taxe foncier and the taxe d’habitation will probably be around $500; for a larger house, around $1,000.
Apartment buildings in France are similar to co-operative and condo buildings in the States. You own your apartment but share responsibility for common parts of the building with other owners. There is a monthly copropriété (co-op) fee that pays for expenses involved in maintaining the building, common utilities (usually including water for all apartments), garbage collection, maintenance, etc. This charge runs approximately $120 per month for both of the above-mentioned Parisian apartments. Charges tend to be lower in provincial cities and towns. In Nice, monthly service charges for most one-bedroom apartments in good residences are mostly between $65 and $90.
Inheritance Tax
French inheritance tax is payable by beneficiaries. The rate is applied on the net value of the asset, after the deduction of liabilities, and any tax-free thresholds depend on the relationship between the beneficiary and the deceased. For instance, a spouse’s personal allowance is currently $83,465, while this is reduced to $50,520 for parents and children. The balance in excess of the allowance is taxed at progressive rates from 5% up to a maximum of 40%. For more remote family members, and others, smaller allowances are given and higher rates of tax will apply. Remember, you can avoid paying inheritance.
Wealth Tax
An annual wealth tax (impôt de solidarité sur la fortune) is levied on individuals with worldwide wealth exceeding €720,000. All assets held in an individual’s name are combined to calculate this tax. Wealth tax is owed on the amount your assets exceed the exemption. For non-residents, wealth is assessed only on French assets. The rate is progressive, from 0.5% to 1%, on assets above €15 million.
Again, you can avoid the wealth tax (and inheritance tax) by owning French property through an SCI, because, with an SCI, your assets are the shares of the corporation. The value of the shares of the corporation is calculated by taking the corporate assets less the corporate liabilities. In other words, if you own through an SCI and have a mortgage on the property, your asset base is reduced by the amount of the loan. If you hold the property in your own name, this isn’t the case.
Rental Income Tax
Whether you reside in France or not, you will be liable for tax on any rental income earned from your French property. For tax residents of France, this is levied at regular income tax rates (see below). For non-residents, it will be a minimum of 25%.
Income Tax Rates
- On income of €4,191 to €8,242, the rate is 7.05%
- From €8,242 to €14,506, 19.74%
- From €14,506 to €23,489, 29.14%
- From €23,489 to €38,218, 38.54%
- From €38,218 to €47,131, 43.94%
- Above €47,131, the rate is 49.58%.
Capital Gains Tax
If you sell your French property during the first two years of ownership, you will be liable for capital gains tax at 33%. A discount of 5% per year is allowed after the second year of ownership, with the effect that after 22 years any gain is not chargeable to tax.