Property Taxes & Legal - mortgagefrance.com

Taxes & Legal

There are two taxes on all residential property. These are collected by the State for the local authorities. These taxes are assessed at individual rates according to location and can vary substantially. It is advisable to ask your estate agent for these details when you are looking at properties to buy.

Taxe fonciére (land tax)

As the owner of a property on the first day of January, you are liable for paying this tax which is due for payment by October/November. Penalties or fines are added for late payment. It is possible to arrange a monthly payment scheme at the outset.

Taxe d'habitation (local taxes)

This is only due on a habitable building. The occupant of the property on the first day of January is liable for paying this tax. Even if you only use the property on occasional visits, if it is furnished and supplied with water and electricity you are liable for this tax. The amount of this tax will vary from one place to another and according to the size of the property. (If you rent your property to someone else and they are living there on the first day of January for the year, they are liable for paying this tax.)

Charges de Co-Propriétaires (maintenance charges)

For those owning property such as an apartment within a complex there are maintenance and service charges to pay. You should consider these charges before signing the Compromis. The charges will vary according to the size and quality of the complex, whether there are lifts, swimming pool, gardens, tennis courts and other facilities.

Capital gains tax

Capital gains tax on property, only applies if you are selling a secondary residence. There is no capital gains tax incurred if you sell your main home to buy another. Calculating any tax due on the re-sale of a property is complicated and professional advice should be sought. The tax is applied to the difference between the sale price and that of the original purchase price plus the transaction costs. In other words - the gain.

Wealth tax

Individuals resident in France on 1st January and non-residents who have assets in France are taxed on the basis of their assets as at 1st January each year. Wealth tax only effects those with assets over €732,000 (2005 rate) and is calculated in bands above that figure.

French Succession Laws - the Law of Inheritance

Inheritance law in France is very different to the Inheritance law in the UK and other countries. French succession law applies to properties in France, even if the owners are not French nationals. Under French succession law you are not able to leave your assets to anyone you please. French Succession Law protects your heirs (in other words, your children) - they come first, whilst your spouse or partner is treated very differently.

You should take advice from your notaire and act on it before signing the acte de vente. It is difficult to make changes once the acte de vente had been registered and can cause serious consequences. Even for straightforward family circumstances you should seek advice, but if your situation is more complicated, because of being married more than once or having children and step-children, it is essential.

SCI - Société Civile Immobilière

An SCI is a property company and as such will have to keep annual accounts. Although it can be used to minimise succession tax by gifting shares to your children during your lifetime, they are usually used by a group of unrelated people to purchase a property as co-owners. An SCI is meant to be non-trading, therefore it is not the right solution if you are planning to run gîtes or chambres d'hôtes.

From a UK tax perspective, if you are a director of an SCI, and have free use of a property in France for holidays, then you can become liable for income tax on the assessed benefits in kind. Taking professional advice is essential.