PURCHASE COSTS AND TAXES

What you’ll be liable to pay when buying, owning and selling your French property

As you would find in any country, buying property in France entails a certain amount of costs and taxes – much of which helps to ensure a smooth and very safe buying process overseen by an experienced ‘notaire’.

Purchase Costs

All French notaire’s work directly for the Government, and you’ll have to pay between 2-3% of the price of the property for the services they provide. Apart from this notaire fee, you’ll also be liable for TVA (VAT) on the gross price of the property, charged at the standard rate of 20%. This is payable on final completion of the transaction.

Purchase Taxes

The degree to which you are liable to pay taxes in France will depend on your own personal circumstances. We would highly recommend you consult a qualified French Tax lawyer to discuss your tax liability and options and we would be happy to recommend one.

Property Taxes

As in other European countries, property owners pay two types of tax on their property each year in France – ‘Taxe Foncière’ (similar to land and property tax) and ‘Taxe d’Habitation’ (similar to council tax). However, if owners have signed a commercial lease with the management company to let their property then there is no “Taxe d’Habitation” to pay. The rate at which these are set depends on the ‘size’ of your property on January 1st each year. Thus these taxes are to be paid by whoever owns the property on the 1st of January each year. The rate at which these two types of tax is charged is calculated by your local authority or Mairie. An estimation of the amount you will probably have to pay is listed below:

Property ‘Size’ Tax d’Habitation Tax Foncière
2 Bed Property €350 per annum €350 per annum
3 Bed Property €400 per annum €400 per annum
4 Bed Property €500 per annum €500 per annum
5 Bed Property €700 per annum €700 per annum

 

Sales Taxes (Capital gains tax or ‘value added’ tax)

Should you decide to sell your property at the Château de la Durantie, you will most likely be liable for taxes on the sale. If you are a UK resident for tax purposes, then any ‘added value’ (profit) you make from the sale of your property in France will be subject to French sales tax (in line with Article 14 ss1 of an agreement between the French and UK governments).

You will thus be liable to pay the same rate of tax as any French person selling a property in France. The rate of sales tax in this instance is 19%.

Since August 2012, an added rate of tax has been introduced by the new government – this adds an extra 15.5% to the amount payable on any ‘added value’. This amounts to a total tax rate of 34.5%.

However, there is a system of tax reductions in place that reduce this figure of 34.5% depending on the number of years you have owned the property. After having owned the property for 6 years or more, the 34.5% figure will start to be reduced. After 30 years of property, the 34.5% rate is reduced by 100% – and thus you will have no tax to pay at all on any ‘added value’. The rate at which the tax rate degrades is laid out in the following table:

Property owned for Rate of deduction
Less than 6 years 0%
Between 6 and 7 years 2%
Between 7 and 8 years 4%
Between 8 and 9 years 6%
Between 9 and 10 years 8%
Between 10 and 11 years 10%
Between 11 and 12 years 12%
Between 12 and 13 years 14%
Between 13 and 14 years 16%
Between 14 and 15 years 18%
Between 15 and 16 years 20%
Between 16 and 17 years 22%
Between 17 and 18 years 24%
Between 18 and 19 years 28%
Between 19 and 20 years 32%
Between 20 and 21 years 36%
Between 21 and 22 years 40%
Between 22 and 23 years 44%
Between 23 and 24 years 48%
Between 24 and 25 years 52%
Between 25 and 26 years 60%
Between 26 and 27 years 68%
Between 27 and 28 years 76%
Between 28 and 29 years 84%
Between 29 and 30 years 92%
Over 30 years 100%

 

Inheritance Tax

If the owner of a property at the Château de la Durantie is a UK resident, then the agreement put in place between France and the UK on property tax should be referred to in respect to inheritance tax. On the death of the owner (even if domiciled in the UK), inheritance tax will be liable by the inheritors of the owner’s estate. The rate at which this is charged will be calculated according to French law, but any exemptions, relief and deductions that are applicable under French law will also be taken into account (for example, the portion of the property received by the surviving spouse is entirely exempt from inheritance tax).

Rental Tax

Any rent received by the owner of a property at the Château de la Durantie will be liable to French tax on that rental income. The rate of this tax will be very similar to that of income tax rates for French residents. The ‘minimum rate’ is 20% – however, you will pay a lower rate than that if your overall income is below a certain amount. You will pay the following rates of tax depending on your overall income:

 Your overall income Tax rate on rent income
For the fraction of income not exceeding €5,963 0%
On the fraction greater than €5,963 and not exceeding €11,896 5.5%
On the fraction greater than €11,896 and not exceeding €26,420 14%
On the fraction greater than €26,420 and not exceeding €70,830 30%
On the fraction exceeding €70,830 41%

A new level of taxation, in draft form, looks likely to be added to this. It will be a 45% rate on the portion of income exceeding €150,000.

Wealth Tax

The Wealth Tax or ISF is based on the net value of taxable assets.  Thus tax payers should assess the value of their assets on 1st January in the year of taxation and then deduct any debts that affect those assets.