Useful informations for foreigners

Foreign 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 .

Capital Gains on property

Capital gains tax on property is determined as follows :

PRICE OF SALE – PURCHASE PRICE = NET CAPITAL GAIN

The net capital gain is determined after the deduction of allowances for the holding period, in accordance with the table below. 

 

Period held

Rate of allowances applicable in each year of ownership

Income tax base + additional tax

Rate of allowances applicable in
each year of ownership

Base for social security contributions

Less than 6 years

0 %

0 %

From 6th to 21st year

6 %

1.65 %

End of 22nd year

4 %

1.60 %

Beyond 22nd year

Exempt

9 %

Beyond 30th year    

Exempt

Exempt

 

The tax rates are as follows: 19% for income tax + additional surcharge of 2 to 6% + social security contributions of 17,2%.

 

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 – Real Estate Wealth Tax (IFI)

You are liable for the IFI when the net value of your real estate wealth is greater than 1,3 million euros.

In addition, foreign citizens setting in France benefit from an exemption on their property abroad up to the end of the 5th year following their move to France.

 

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

The same taxation rates as residents.

V - Real Estate Wealth Tax (IFI)

Non residents are only taxed on their real estate 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.