What charges should I be aware of when buying property in France?

What French taxes apply if I live in France?

What French taxes apply if I live abroad but have French assets such as property?

What property related tax deductions can I claim for my French income tax?

Which French tax forms do I need to file?

Do I need to file a French income tax return if my French property is not yet completed?

Are there any special French tax forms for a French leaseback property?

What charges should I be aware of when buying property in France?

For apartments or condominiums, you can expect to pay “charges de copropriéte”. These are monthly or quarterly maintenance and service charges that relate to the common areas of the building.

Other running costs often include but are not limited to: annual property tax (taxe foncière), annual occupant tax (taxe d'habitation), electricity, water, heat, internet, telephone, home insurance and garbage removal if in the countryside.

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What French taxes apply if I live in France?

Many people are surprised to learn that if you are a tax resident of France, you must declare all your worldwide income and assets, no matter which country the income was earned in or where the assets are held. The various types of income will be treated and taxed differently based on the country of origin. There are many tax treaties in place between France and other countries to avoid double taxation.

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What French taxes apply if I live abroad but have French assets such as property?

You only have to declare income that originated in France to the French tax authority. Examples of taxable French income include:

• Rental income from French property
• Income from stocks or bonds invested in France
• Capital gains on sale of French property
• Inheritance tax on transfer of ownership of French property (even if you die outside of France)

Besides French income tax, you should be aware of ISF or “impot sur la fortune.” This French wealth tax is applicable to the value of all of your assets in France less any debt against them. The wealth tax begins on any net assets amount over 800,000 euros.

If you own French real estate, you will also be responsible for “taxe foncière,” or the land tax / property tax. It is payable the last quarter of the year. This expense is often split between the buyer and seller in the case of a mid-year purchase. If you live in the property, you will also be responsible to pay a “taxe d’habitation” which covers services and maintenance provided by the local government. If you rent out the property, this tax is usually recharged to the renter. This tax is also payable the last quarter of each year.

For French companies that own property, the 3% Property Tax may apply. The 3% tax applies to all legal entities in France that have investments in French property such as SCIs. Historically, this tax was created to prevent property owners from avoiding payment of various other taxes (such as the wealth tax) by using corporations to mask property transactions between individuals. The 3% tax is assessed on the market value of the French property annually. Unlike the wealth tax, you cannot deduct outstanding mortgages from the assessed value. The tax either must be paid by the foreign company owner of French property or the company must make an annual declaration of their shareholder to the French tax authority so the appropriate wealth tax can be individually assessed.

There are many tax treaties in place between France and other countries to avoid double taxation therefore it is important to seek expert advice to minimise fiscal imposition.

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What property related tax deductions can I claim for my French income tax?

Taxable income from rental properties in France can be reduced by the following expenses:

• interest paid on your French mortgage
• renovation expenses
• land tax (taxe foncière)
• management fees
• depreciation (in some cases)
• legal fees for the act of sale (in some cases)

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Which tax forms do I need to file?

The following forms commonly apply to international buyers of property in France:

• Form 2042 is the main tax from used to declare your worldwide income
• Form 2042 C is an additional form used when you have rental income from furnished property, if you have paid any tax in another country that can be offset against French tax or income from a personal business.

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Do I need to file a French income tax return if my French property is not yet completed?

You should complete the French income tax return with a declaration of zero income so you can still deduct expenses incurred in that tax year for the property such as interest paid on a mortgage, notary fees, land tax and renovation (not all deductions are listed here.) You can then carry forward the losses to apply when you start gaining income. This also applies to French residents that have a rental property but have not rented it out yet. If you do not file a tax declaration in the year the expenses are incurred, you lose your deduction.

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Are there any special French tax forms for a French leaseback property?

1. When you purchase the property, you must inform the French government that you have purchased a leaseback and that you want to renounce the tax exemption (“franchise en base.”)

2. Once the construction on the property is complete, you must request a reimbursement of the VAT. It takes from 3 to 6 months to then be paid. Normally this is debited directly into the French bank account you have opened.

3. VAT declarations must then be filed each year to declare the VAT you have collected on your furnished rental income and then repaid to the French government. Often the developer of the leaseback program will designate a bilingual accountancy firm to handle all VAT filings for the buyers. If you have mutliple rental properties, be sure to use the same accountant to do all your filings to avoid complication with the French tax authorities.

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