Overview of French Tax System:

Under the French tax system, non-residents are taxed on income arising from French sources only

and are liable to a number of property related taxes highlighted below.

VAT is applicable on new built properties and is included in the purchase price. The standard VAT rate is 19.6%. Purchasers can claim back the VAT in leaseback investments (“résidences de tourisme”).

French income tax is payable on income arising in France. French income tax is payable at progressive rates on income after allowable deductions for expenses incurred in connection with letting or maintaining the property. Different tax regimes are applicable depending on whether the property is let furnished or unfurnished.

French Wealth Tax:

Non-residents are liable to French Wealth Tax. In France, wealth tax is payable by people whose assets exceed €1,300,000.00. Wealth tax is payable at a progressive rate from 0.75% to 1.80%.

Local Property Taxes:

In France, they are two main local taxes which are equivalent to the UK Council Tax. They are: “Taxe Foncière” (a property/land tax) and “Taxe d’Habitation” (a residence tax). They are paid annually to the local authorities. The owner of the property is liable for the “Taxe Foncière”. It is apportioned on a pro-rata basis and the purchaser will be required to reimburse the seller for the remaining part of the year. Owners of new properties are exempt from this tax for the first two years of structural completion. The Taxe d’Habitation is payable by the person occupying the property at 1st January and is not apportionable. The purchaser will therefore not be required to pay this until 1st January following completion of his/her purchase. Both taxes are based on the rental value of the property and vary from region to region.

Capital Gains tax:

the tax rate is 19% for non residents and 33% for residents of France. A reduction factor of 10% is applied for each year that the property is owned for the first 5 years. There is no French CGT to pay if the purchaser owned the property for more than 15 years. There is no capital gain tax to pay if the property was the owner’s main residence.

French Inheritance Tax (IHT) -The rate of IHT payable in France varies considerably and is dependent on a number of factors including – the relationship between the donor / deceased & the beneficiary, the amount to be inherited and the number of children. French IHT is payable by non-residents in France. There are no inheritances taxes due between spouses or couples who have contracted a civil partnership agreement (equivalent to the PACS in France).

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