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French Notaire Fees - 'Frais de Notaire'

In calculating the transaction costs of buying property in France it is important to distinguish between fees and taxes, and between older and new property.

In summary, the total fees and taxes payable for each is as follows.

  • Older Property - The total fees and taxes payable for the purchase of an existing property are between 7% and 10% of the purchase price, excluding estate agency fees, although for very low priced transactions it may be higher.
  • New Property - You will pay around 2% in fees and registration taxes, plus VAT at the rate of 19.6% on the purchase price (except for sales between private individuals), excluding estate agency fees.

Although these total fees and taxes are often referred to as ‘notaire fees’ (frais de notaire), in fact the actual notaire fee itself is only about 1%. The rest comprises stamp duty registration taxes and disbursements.

Notaire fees are regulated by the government and vary according to the sale price of the property.

 

Local Property Taxes in France

  1. If you own a property in France, then the local property rates payable comprises two different taxes called the taxe d’habitation and the taxe foncière.

     

     Taxe d’Habitation -     French Residence Tax


Liability to the Tax

This is an annual residence tax imposed on the occupier of a property in which they were resident on 1st January of each year.

If the property is your second home, even though you may not physically be resident on 1st January, the tax is still payable, provided the property is capable of occupation.

Thus, the law assumes that if you have the right of occupation of the property and it is furnished and habitable, then the tax is payable. Liability to the tax has nothing to do with the amount of time you actually occupy the property.

Nevertheless, where you only use the property for a few weeks a year, and it is otherwise let out as a furnished letting, then you can be exempted from the tax, although you would then become liable for business rates.

If you let a property on an annual basis the tax is payable by the tenant.

Tenants of holiday lettings do not pay the tax, but any tenant occupying the property on 1st Jan on a permanent or even semi-permanent basis, is liable for the tax. The rule applies whether the property is furnished or unfurnished.

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 Calculation of the Tax

The determination of the amount payable is made by the local council (commune), but the calculation and collection of the tax is carried out by the central government tax authority.

The formula for the calculation is ponderously complex but, broadly speaking, it is based on the notional rent that the property might be expected to achieve in the open market, having regard to the condition, size and location of the property.


 Exempted Persons

Complete exoneration from the tax is available to certain groups of persons, provided the property is their principal home.

  • Those over 60 years of age, subject to a test of resources;
  • Widowed persons irrespective of age, subject to test of resources;
  • Disabled or infirm persons in receipt of, or eligible for, l'allocation de solidarité aux personnes âgées (ASPA), l'allocation aux adultes handicapés (AHH), or l'allocation supplémentaire d'invalidité (ASI);
  • Persons in receipt of Revenu de solidarité active de base (RSA), provided no other income, (otherwise then exempt on basis of income scales below).

The exemption applies only if the property is your principal residence and you are not liable for French wealth tax.

There is no test of resources required for those in receipt of ASPA, ASI or RSA.

If you are disabled, but not in receipt of any of the above benefits you should consider making application for exemption. Provided you are able to demonstrate that you are incapable of employment then you may be able to obtain an exemption.

In the case of a married couple the age or disabled condition only needs to be met by one of the spouses, although if one of the spouses is working then exemption may not be granted.


 

Taxe Foncière - Property Ownership Tax

This tax is an annual property ownership tax imposed on the owner, whether or not the property is actually occupied by them, or rented out.

The tax is levied for the year in which it is imposed and payable by the person(s) owning the property on 1st January of that year.

The tax goes towards the funding of local services by the commune, inter-communal and departmental councils. So all three councils impose an element of the tax and benefit from partial receipt of the revenues from it. Since 2011, the regions no longer participate in the tax.

 Calculation of the Tax

The determination of the amount payable is made by the local councils, but the calculation and collection of the tax is carried out by the central government tax authority.

The basis on which the tax determined is similar to that of the tax d’habitation, although in a more straightforward manner.

Broadly speaking, the basis of the assessment is the notional rent that the property might be expected to achieve in the open market, having regard to the size condition and location of the property. This assessment is then discounted by 50% to take account of running costs eg repairs, insurance.

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 Exempted Properties

 New Buildings

New buildings, additions to existing buildings, and rural conversions are granted full exemption from the tax for two years, provided the works are declared to the tax authority within 90 days of practical completion. Buildings of a non-domestic nature are only granted partial relief.

The relief of that part of the tax imposed by the commune is subject to no contrary decision by the commune or inter-communal body to impose the tax.

 Energy Works

There is also partial (50%) or full exemption, for up to 5 years, for those new homes constructed to an energy efficiency standard that is higher than the regulations currently in force.
This exemption is at the discretion of the local authorities. You would need to make enquiries at your local tax office.

Local authorities are also permitted to exempt from the tax those older homes that have had important energy conservation works carried out to them.

This exemption only applies to those dwellings built before 1989, and also on condition that the expenditure (excluding labour costs) in the previous year on such works exceeds €10,000, or €15,000 over the previous three years.

The exemption is at the rate of 50% to 100% for a period of up to five years.


French Capital Gain Tax

  Definition

Capital gains tax in France is called impôt sur les plus values and is a tax payable on the sale of land or buildings, on shares, and certain other personal property, subject to any exemptions, allowances and deductions that are available.

We can distinguish three different terms used, depending on the type of transaction:

  • Land and Buildings - Impôt sur les plus values immobiliere.
  • Personal Property - Impôt sur les plus-values biens meubles.
  • Shares - Impôt sur les plus-values mobilières.

 

Taxable Persons

Both individuals and companies are liable for capital gains tax, although there are different rules that apply.

In this review we focus on capital gains tax as it applies to individuals not as it applies to property held within a company, such as a Société Civile Immobilière (SCI) or to those who buy and sell property as a business.

Transfers of real estate are fully liable to capital gains tax, including exchange properties and those sold on the basis of a life annuity rather than a capital sum.

Conversely, properties that are gifted are not liable (although they may be subject to gifts tax) and property that is inherited is similarly exempt (although it is subject to inheritance tax rules).

 Rates

The applicable tax rate for gains on real estate will depend upon:

  • Your country of residence for taxation purposes;
  • The size of the capital gain;
  • Exemptions and allowances to which you may be entitled.

In general, most countries have a taxation treaty with France under which capital gains on the sale of property in France is taxed in France.

The various basic rates of capital gains, depending on your residency, are shown below. The rates are those applicable before exemptions and allowances, considered in later pages..

 Resident of France

If you are a resident of France then the applicable tax rate is 34.5%.
This sum comprises capital gains tax at the rate of 19%, plus 15.5% social charges.

 EEA Resident

If you are not resident in France, but you are resident in the EEA (as well as Norway, Iceland and Liechtenstein), then the applicable tax rate is the same - 19%, plus 15.5% social charges, giving a total charge of 34.5%.

This rule applies for all sales since 17th August 2012, when non-
residents became liable for social charges, a change in the law that is subject to some legal controversy.

 
Non-Resident

Those who are neither resident in France nor the EEA pay capital gains tax at the rate of 33.3% plus 15.5% social charges, giving a total charge of 48.3%.

This rule applies for all sales since 17th August 2012.

If you are based in a tax haven that does not have a tax agreement with France the basic rate that applies is 50%, plus 15.5% social charges.

Again, as with EEA residents, depending on the terms of any tax treaty with France, you may also be liable in your home country.

Supplementary Tax

In addition to the basic rates of capital gains tax, since 1st January 2013 a supplementary rate of tax is also payable on large gains. (Article 70, troisième Loi de Finances Rectificative 2012)

There are five rates of taxation, depending on the size of the gain.

The following table shows a breakdown of the thresholds at which the supplementary tax is triggered and the rates that apply.

Amount of Gain

Rate

Greater than €50K up to €100K

2%

Greater than €100K up to €150K

3%

Greater than €150K up to €200K

4%

Greater than €200K up to €250K

5%

Greater than €250K

6%


 Exemptions on sale of Property

There are a number of important exemptions and allowances from French capital gains tax on the sale of land and buildings.

Each on of these exemptions and allowances is considered below.

  1.  Main Residence in France
  2.  Duration of Ownership
  3.  Former Residents of France
  4.  Tenant Sale of Property
  5.  Low Value
  6.  Elderly/Disabled Persons in France
  7.  Divorce/Separation in France

 

 

Wealth Tax in France

The French wealth tax is called Impôt de solidarité sur la fortune (ISF).

There is an exemption from the tax for five years on those assets located outside of France, for those who become resident in France after 6th August 2008.

Thus, for the first five years of you becoming resident in France, you will only be liable for the wealth tax on those assets located within France.

After this date, the tax is payable if you have total worldwide net assets in excess of €1,300,000, a threshold that is inflation linked.

There are certain deductible allowances before the calculation of net assets, notably for certain types of debt and investments.

If you are resident in France there is also a 30% allowance against the value of your principal home. This concession does not apply to second homes and the discount does not ordinarily apply in relation to a property held through a
Société Civile Immobilière (SCI).

The applicable date for determining net assets is 1st January in the year of imposition.

Accordingly, whatever may have transpired in the household during the year is not applicable for the purposes of assessing liability to the tax, as it is based on the situation as at the beginning of the year.

The extent of your liability will depend on whether or not you are resident in France.

  • Resident - If you live in France then the whole of your worldwide net assets will be taken into consideration for the purposes of the tax.
  • Non-Resident - If you do not live in France only assets actually in France are considered.


Rates of Wealth Tax in France

The rates of taxation applicable for 2013 are shown below.

Fraction Taxable

Rate of Tax

€0 - €800,000

0%

€800,000 - €1,300,000

0.50%

€1,300,000 - €2,570,000

0.70%

€2,570,000 - €5,000,000

1%

€5,000,000 - €10,000,000

1.25%

€10,000,000+

1.50%



Since 2013, a wealth tax cap operates, so that total taxes should not exceed 75% of income. The calculation is complex, and although it may seem way-off for most people, in fact living off the proceeds of capital is a way of reducing potential wealth tax liability.

 


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