Taxation of foreigners in France

NForeign owners in France are liable to pay taxes on their property in a certain number of situations. The most significant of this tax is the income tax and local taxes. Certain, even non-residents, may be subject to tax on capital as their property is materially based in France.

Taxation of residents

I - Income Tax

Tax residence in France

A person is considered a tax resident in France if one of the following conditions is met:

  • Resides more than 183 days per year in France,
  • their professional activity, paid or unpaid , is exercised in France , unless this is carried out as an ancillary activity,
  • their center of economic interest is in France . By this criterion, it means the place where the taxpayer has made its major investments, where they have their main office, where the assets are managed. It may equally be the centre of business activities or where they obtain the major part of their revenue.

For a tax resident, the main residence in France is their residence for tax purposes and will be taxed on their income, including income received from abroad . Taxation agreements against double taxation between France and other countries exist and are used to avoid paying income tax twice.

Income from property

If a foreigner has a property in France , they are likely to pay income tax on the income of their French property. It is often concerning received rent.

In France , some tax systems exist to encourage individuals to invest in rental property . For example, the Duflot law entitles you to a tax deduction based on the cost price of new or rehabilitated housing which meets the technical performances of new.

As above, the tax conventions against double taxation work and some declare that the properties that exist in France will be imposed only in France .

Gains on property

If a foreigner sells his property situated in France, he will be liable to a levy set at 16 or 33.33 % for the real estate gain.

However, there are situations where capital gains are exempt from taxation, especially if the property sold is their fiscal residence.

II - Local taxes

All property owners in France must pay a tax called 'taxe foncière' (estate tax). This tax is based on the assessed value based on the location, type of construction, size and comfort criteria.

In addition, they are also liable to an occupancy tax, or 'taxe d 'habitation'. This tax is based on the rental value of the property defined by the land registry and the local council, and it is due by the occupant on 1 January.

III - The solidarity tax on wealth

Individuals who have their tax domicile in France, who have assets in France and outside of France with a net value superior of 1.3 million on January 1, 2013 are subject to tax wealth (ISF) and must present a declaration. It is the same for individuals who do not have their tax domicile in France but who have property with a net value of more than 1.3 million Euros.

The net taxable value is the total value of assets on January 1st of each year on which you apply the tax reductions.

However, the net assets are exempt from taxation below a certain threshold each year. Above this threshold, the assets will be taxed as follows:

Segments of taxable net wealthTax rate
up to 800 000 euros 0 %
between 800 000 and 1 300 000 euros 0,5 %
between 1 300 000 and 2 570 000 euros 0,7 %
between 2 570 000 and 5 000 000 euros 1 %
between 5 000 000 and 10 000 000 euros 1,25 %
above 10 000 000 euros 1,5 %

Taxation of non-residents

Buying a property in France by a non-resident also has significant tax implications.

I - The flat tax

Non-residents, who have one or more non-rented homes in France, are subject to a flat tax rate equal to three times the rental value of these homes.

II - Income from property

The same taxation rates as residents.

III - Local taxes

The same taxation rates as residents.

IV - Tax on the gain

For non-residents, effective from August 17, 2012, the real estate gains made will be subject to social charges, which are as follows:

  • 34.50% for non-residents who are part of the European Economic Area
  • 48.83% for non-residents outside the European Economic Area (33.33% + 15.50%)
  • 65.50% for non-residents under a non-cooperative state (50% + 15.50%).

V - The solidarity tax on wealth

The same taxation rates as residents, but only on the properties located in France.

The laws of succession

When a foreigner purchases a property in France, the choice of law clause or proper law clause is applied. However, with regard to inheritance and donations, it is the French inheritance law that applies.

For more information on taxation and inheritance laws in France, it is advisable to approach consultants, notaries and lawyers in order to obtain precise and wise advice.