Tax Finance Wisdom

France is known for its complex tax and administration systems. But it is not as complicated as it seems. If you own a property in France or intend to buy one, don’t give up because of these administrative steps. All you need is some clues to help you understand how it works.

The first tax I will explain here is the “taxe d’habitation” (understand: French Residence Tax). It is imposed every year on the occupier of a property, in which he/she lived on the 1st January. This means that if you rent your French property out, you won’t pay for this tax but the tenant will have to. Or if you move in in June, for example, the former tenant has to pay for the tax (because he was in the house on the 1st January), unless a private agreement between you both has been made. However, you must keep in mind that provided the property is your second home, even though you don’t live in it on the 1st January, you will have to pay for the French Residence Tax. This is because the tax authority includes properties that are “capable of occupation” and not physically occupied. An interesting thing is that holiday lettings are exempt, but all permanent or semi-permanent stays are liable for the tax. The property being furnished or unfurnished makes no difference. The TV licence (”redevance audiovisuelle”, in French) comes along with the annual Taxe d’habitation. It amounts to €116 a year, for a household, no matter how many television sets you have.

The calculation of the tax is rather complex but in a word it is based on the notional rent a property might achieve (taken into account the condition, size and location of it), without any relation to the actual rent that is paid. The amount of the tax is higher in town than in the countryside. As the formula applied to this notional rent varies with the income the authorities need to raise, the amount of tax will therefore depend on the decisions of the different towns. If you want to check the notional rental value of your French property, you need to ask the local Centre des Impôts Fonciers (Service de Cadastre).

Your property may be exempt from the tax if it is a chambre d’hote or a classified gite. Visit the local mairie to know more about this. The other case of exemption is if you have tried without success to let your property. However, you will have to demonstrate evidence that you have been trying to let it. Lastly, people completely exempt of the tax are those over 60 years, widowed, disabled or infirm (incapable of gainful employment).

The second tax you may have to pay for in France is the “taxe fonciere”, or French Wealth Tax. It is also an annual tax, but imposed on the owner of a property (not on the occupier). Whether it is occupied or rented out makes no difference. In case you sell your French property during the year, you have to pay for the whole year, but don’t worry, you can agree with the new owner to share the costs. It is a common thing, provided you mention it in the sale and purchase agreement.

The basis on which it is determined is the same as that of the Taxe d’habitation. Another tax often comes with the Taxe fonciere: the rubbish collection tax (”taxe d’enlevement des ordures menageres”). Some local councils make a separate charge for it, while in some other towns it is funded from the general budget. Here again, the taxe fonciere is higher in towns than in the countryside. Usually you receive the tax demand (Avis d’imposition taxe foncière) during the third quarter of the year and a payment deadline is specified. All types of property are subject to this tax, that is to say residential, commercial, professional and industrial properties. Even land is subject to the tax, but are exempt: agricultural buildings, new woodland planting and properties built before 1989 where major energy conservation measures are undertaken. Two-year-full exemption to the Taxe fonciere is granted to new buildings, additions to existing buildings and rural conversions. There again, some people are exempt from paying for this tax. They are: people aged more than 75, disabled and those who receive the “minimum vieillesse” (which is a pension for elderly people with low income). Lastly, people aged between 60 and 75 benefit from a €100 (or more) reduction. Keep in mind that these exemptions are granted only if the property is your principal residence. Like for the Taxe d’habitation, you can be granted a relief from paying the tax if you are have been trying without success to sell your property.

Now that you know the most important things (and more!) about the French tax system for properties, you can stress less take the step to buying your dream French property!

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