Charges, taxes and taxation when acquiring real estate in france
You wish to make a first property purchase in France and you are a tax non-resident? We will summarize all the fees, taxes and taxation that may apply and explain them to you. You will thus be able to better define your budget so that it takes into account all the costs, whether they are related to the acquisition or the ownership of the property.
1- What are the fees to become a homeowner?
The first fees to be considered will be acquisition fees, some are mandatory and some are optional
Real estate agency fees, optional but essential. It is not necessary to work with a real estate professional to acquire or sell property in France. However, from abroad, it seems essential to benefit from the help of a professional who will share with you his knowledge of the market, who will assist you in your project by guiding you on your rights and duties with confidence.
Transaction fees, commonly referred to as agency fees, are not regulated and are different among all real estate professionals. (You will find the regulations related to the real estate agent profession here)
It doesn’t cost anything to compare the rates and services offered by each player in the business, so choose the formula that best meets your expectations. You will find all our services and fees on our page
Acquisition costs, mandatory and often misunderstood. The acquisition costs are the costs that the buyer pays on the day of signature of the act of sale, these costs are to be paid to the notary and are added to the purchase price of the property They vary between 2% and 3% of the selling price for the purchase of a new property and between 7% and 10% for the purchase of an old property. What do these fees consist of?
- Taxes known as registration fees are paid directly to the Public Treasury and return to the state or local authorities.
- The fees and disbursements are used to pay the various parties in charge of producing the documents necessary for the change of ownership (registrar of mortgages, registration of mortgage guarantees, publication costs of sale, urban planning document, excerpts from the cadastral map, expert surveyor, facility management office, etc…).
- The fees of the notary, do not make the mistake of thinking that all the fees represent the fee of the notary, a small part (about 15%) is intended to pay the notary for his work.
For more information on acquisition fees, visit the official website of notaries.
2- What are the taxes for an owner?
In France, there are mainly two local taxes called property tax and housing tax, but depending on your situation you may be subject to the tax on vacant housing or the tax on vacant housing.
The property tax. This tax is due each year by the owners of built and unbuilt property (houses, industrial and commercial premises, land, etc…). The property tax is calculated by the tax authorities on the basis of the cadastral rental value of the property and the rates determined by the local authorities.
The house tax. This tax applies to all residential accomodations (primary and secondary residences) and all occupants (landlords or tenants). This tax is calculated directly by the tax authorities according to the situation of the occupant on 1 January of the tax year. The amount due is calculated by multiplying the net rental value of the property by the tax rates determined by the local authorities.
The tax on vacant dwellings. This tax applies to owners of dwellings that have been unoccupied for at least one year. You may be exempted if you meet the following conditions:
- The dwelling requires work of at least 25% of the value of the property and is not habitable in the state.
- Empty housing because it waits for a future tenant or future owner in the context of a rental or in the context of a sale.
- Dwelling occupied for at least 90 consecutive days
- Furnished secondary residence subject to housing tax
The tax on vacant dwellings applies in tense areas, but in some other areas the tax on vacant dwellings may apply. Visit the website of the French administration to find out in which area your property is located.
3- What taxes for a non-resident owner?
Taxation in France exists as soon as you generate income, whether it is in the form of remuneration, dividends, derived from capital gains or real estate, rental income etc…
Also, the tax administration has created a tax that is calculated according to the value of your real estate.
The rental income. You want to rent your property and you wonder how your income will be taxed. Taxation and taxation depends on several factors:
- Rental empty or furnished
- Annual rental amount
- Resident European Union or Non-EU
- Total duration of rental
Furnished rental is clearly more advantageous than an empty rental because it allows you to deduct from your taxable income the costs related to the acquisition of your property, whether new or old, and also allows you to deduct the depreciation of furniture and real estate, whether in LMNP or LMP, which ensures that you do not pay taxes for several years.
Since the last modifications applied to the LMP status, this status has become even more advantageous with the possibility of being completely exempt on the gain generated at the resale of the property (according to certain criteria).
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Property Tax, IFI. It is the tax that has replaced for some years the ISF, the tax on wealth. You will, as a non-resident, be subject to this tax only on your French property assets, except exemption, from the moment when it is valued at €1.3million or more. Below is the tax bracket table:
|FRACTION OF THE NET TAXABLE VALUE OF THE ASSETS||APPLICABLE RATE|
|Less than 800 000€||0%|
|800 000€ to 1 300 000€||0,50%|
|1 300 000€ to 2 570 000€||0,70%|
|2 570 000€ to 5 000 000€||1,00%|
|5 000 000€ to 10 000 000€||1,25%|
|10 000 000€ and more||1,50%|
The taxation of surplus value in real estate can be expensive. If you resell your property much more expensive than you bought it then you are normally concerned, except exemption.
First the gross capital gain value is calculated, then the net capital gain value is calculated before the tax rates are applied.
Gross Capital Gain = Selling Price – Purchase Price
The acquisition price may be increased:
– notary fees at the time of purchase is approximately 7.5% (flat rate)
– construction, reconstruction or extension work, either with the sum of the invoices or at a flat rate of 15% if the property has been held for more than 5 years.
The net capital gain is the gross gain after deduction of the deductions for the holding period, according to the table below:
|HOLDING PERIOD||APPLICABLE INCOME TAX ABATEMENT RATE||RATE OF ABATEMENT APPLICABLE FOR SOCIAL SECURITY DEDUCTIONS|
|Less than 6 years||0%||0%|
|From 6th to the 21st year||6%||1,65%|
|From 23rd to the 30th year||Exemption||9%|
|After the 30th year||Exemption||Exemption|
The tax rate applicable to the net capital gain is then as follows:
- 19% income tax + additional 2-6% surtax
- 17.2% Social security contributions (CSG)
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