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Are you looking to purchase property in France and wondering about the tax implications? As a property owner in France, whether you have a residency card or not, you are subject to French tax laws. In this article, we will examine the various taxes that foreign property owners must pay, whether they own real estate as a primary residence, secondary residence, or rental investment in France!
The property tax is a local tax due by the property owner on January 1st of the tax year. All property owners in France, including foreign owners, must pay this tax, whether for a primary residence, a secondary residence, or a rental investment.
The property tax amount varies as it includes several variables:
Recently abolished for primary residences, the housing tax still applies to all owners of secondary residences, whether they are French or not! Like the property tax, it is due on January 1st of the tax year.
The calculation of this tax is based on the property's cadastral rental value, adjusted according to various criteria, such as the size of the dwelling or the level of comfort, before being reduced by allowances for family burdens depending on the tax household's situation (number of children, for example). The final amount of the housing tax is determined by applying the rates set by local authorities (municipalities, inter municipalities).
If you own real estate in France and it is rented out, then the rental income is subject to income tax.
To calculate this tax, the owner must first determine the gross amount of their annual rental income, then subtract deductible expenses (maintenance work, loan interest, property tax, non-recoverable condominium charges, etc.). This calculation yields the net rental income, which will be added to the other income of the tax household and taxed according to the income tax scale.
The IFI applies to property owners whose net value exceeds 1.3 million euros on January 1st of the tax year. The IFI calculation takes into account the real market value of the owned real estate and rights, directly or through shares in companies, reduced by any debts incurred for the acquisition or repair of these properties.
The IFI rate is progressive, with rates ranging from 0.5% to 1.5% depending on the value of the real estate assets. Certain deductions and exemptions may apply, especially for the primary residence, for which a 30% deduction on its market value is provided.
When selling a property in France, foreign owners may be subject to capital gains tax. This tax is calculated on the difference between the sale price and the acquisition price of the property, after applying deductions for the duration of ownership.
Holding a residency card in France can influence the tax treatment. For example, French fiscal residents benefit from a more favorable tax treatment for certain taxes (such as income tax and IFI). However, even without a residency card, tax obligations remain in force for foreign owners of real estate in France.
For foreign nationals owning real estate in France, understanding tax obligations is essential to avoid surprises and ensure compliance with tax management. Whether you own a primary residence, a secondary residence, or a rental property, it's important to understand the applicable taxes and comply with them. By consulting tax experts and staying informed of the latest tax regulations, you can optimize your tax situation and avoid penalties!
