In this article, you will learn about the main tax obligations that apply to property owners in France.
Note: This article is intended to provide general information and is not intended to replace tax or legal advice. A tax advisor can assist you in clarifying the rules, and provide advice tailored to your situation. Do not hesitate to contact our team in Monaco for more information on real estate taxation in France: consulting@rosemont.mc
Taxes related to the ownership of a property in France:
Property tax:
The property tax is an annual tax that all property owners in France must pay, whether they are French or foreign residents. The tax payable is based on the land registry or cadastral rental value of the property (as assessed by the tax authorities) and may vary depending on the location and size of the property.
The property tax is payable by the owner on 1 January of the tax year.
Property wealth tax:
IFI was introduced in 2018 to replace the existing wealth tax (ISF). Any person with real estate assets worth over €1.3 million net, will be subject to IFI. This threshold includes property and property rights held directly or indirectly on 1 January.
Various debts can be deducted, such as expenditure on improvements or construction work, or property loans.
For more information, see our article dedicated to real estate wealth tax in France.
The property tax is an annual tax that all property owners in France must pay, whether they are French or foreign residents. The tax payable is based on the land registry or cadastral rental value of the property (as assessed by the tax authorities) and may vary depending on the location and size of the property.
The property tax is payable by the owner on 1 January of the tax year.
Property wealth tax:
IFI was introduced in 2018 to replace the existing wealth tax (ISF). Any person with real estate assets worth over €1.3 million net, will be subject to IFI. This threshold includes property and property rights held directly or indirectly on 1 January.
Various debts can be deducted, such as expenditure on improvements or construction work, or property loans.
For more information, see our article dedicated to real estate wealth tax in France.
Taxes and obligations related to the occupation of a property in France :
Taxe d'habitation:
Good news for homeowners, after a gradual disappearance, the taxe d'habitation is officially abolished in 2023 for principal residences.
However, it remains applicable to secondary residences, for which a surcharge may be applied in municipalities located in certain designated areas.
This tax is based on the cadastral rental value and is payable on 1 January of the tax year.
Taxes on vacant dwellings:
In France, the tax on vacant dwellings applies to dwellings that have been unoccupied for at least 1 year as of 1 January, with the aim of encouraging the letting or sale of these dwellings. The tax differs according to the location of the property:
Good news for homeowners, after a gradual disappearance, the taxe d'habitation is officially abolished in 2023 for principal residences.
However, it remains applicable to secondary residences, for which a surcharge may be applied in municipalities located in certain designated areas.
This tax is based on the cadastral rental value and is payable on 1 January of the tax year.
Taxes on vacant dwellings:
In France, the tax on vacant dwellings applies to dwellings that have been unoccupied for at least 1 year as of 1 January, with the aim of encouraging the letting or sale of these dwellings. The tax differs according to the location of the property:
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If the property is located in a designated area, the tax on vacant accommodation (‘taxe sur logements vacants’TLV) will apply,
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If the property is not located in a designated area, the tax on vacant accommodation (‘taxe d’habitation sur logements vacants’ THLV) will apply.
Income tax and the declaration of property income:
If you rent out your property in France, you must declare the rental income generated from the property* in your annual income tax declaration. The tax rate applicable will depend on the your other income.
(*such as rent received or income from seasonal rental.) The declaration of rental income and must states the rent received, as well as deductible expenses includingproperty maintenance, repair and improvement costs, interest on loans on the acquisition of the property. Notice of assessment will then be issued by the tax authorities of the tax due.
It is important to note that for owners who rent out furnished property, therental income is taxed as income tax but in a separate tax category as industrial and commercial profits (BIC).
Foreign owners of French property must also make an income tax declaration of their French source income.
Obligation to declare occupancy:
From 2023, all owners of real estate in France must declare the nature of the occupation of the property whether a principal residence, secondary residence or rental accommodation.
The declaration applies to private individuals and companies, SCI, joint owners and usufructuaries (holders of a life interest).
You can find more information on this obligation in our dedicated article: Managing my property: Declaration of use of property.
Taxes related to the sale or transfer of a property in France:
Capital gains tax on real estate:
If you sell your property in France, you may be subject to capital gains tax if you generate a capital gain on the sale.
The capital gain is equal to the difference between the sale price and the original purchase price, taking into account the cost of sale and purchase, renovation work, notary fees, etc.
The rate of capital gains tax varies according to the length of time the property has been owned. Thus, if the property has been held for less than 6 years, the tax rate is 36.2% (19% income tax plus 17.2% social security contributions). If the property has been held for more than 6 years, the tax rate is degressive, with a total exemption from tax after 22 years of ownership.
However, there are exemptions from capital gains tax. This is the case, for example, gains on the sale of a principal private residence, provided that the owner has occupied the property continuously for at least two years before the sale.
It should also be noted that an additional exceptional tax of 3% to 4% may be applied to the capital if the recipient has a high incomes exceeding €250,000.
Inheritance or gift tax:
Inheritance or gift tax is payable either on the succession of the property owner or on the lifetime gift by the property owner..
The level of inheritance or gift tax depends on the value of the inheritance or gift and the relationship between the donor or deceased and the beneficiary. The applicable rates can vary between 5% and 45% depending on whether the beneficiary is a spouse, a child, a grandchild, a brother or sister, or a distant relative.
The taxes must be declared and paid within six months of the death or donation.
Note: Exemptions and allowances may be applied in certain situations, including transfers between spouses, which are exempt from inheritance or gift tax.
If you sell your property in France, you may be subject to capital gains tax if you generate a capital gain on the sale.
The capital gain is equal to the difference between the sale price and the original purchase price, taking into account the cost of sale and purchase, renovation work, notary fees, etc.
The rate of capital gains tax varies according to the length of time the property has been owned. Thus, if the property has been held for less than 6 years, the tax rate is 36.2% (19% income tax plus 17.2% social security contributions). If the property has been held for more than 6 years, the tax rate is degressive, with a total exemption from tax after 22 years of ownership.
However, there are exemptions from capital gains tax. This is the case, for example, gains on the sale of a principal private residence, provided that the owner has occupied the property continuously for at least two years before the sale.
It should also be noted that an additional exceptional tax of 3% to 4% may be applied to the capital if the recipient has a high incomes exceeding €250,000.
Inheritance or gift tax:
Inheritance or gift tax is payable either on the succession of the property owner or on the lifetime gift by the property owner..
The level of inheritance or gift tax depends on the value of the inheritance or gift and the relationship between the donor or deceased and the beneficiary. The applicable rates can vary between 5% and 45% depending on whether the beneficiary is a spouse, a child, a grandchild, a brother or sister, or a distant relative.
The taxes must be declared and paid within six months of the death or donation.
Note: Exemptions and allowances may be applied in certain situations, including transfers between spouses, which are exempt from inheritance or gift tax.
The tax obligations of property owners in France vary according to their personal situation. It is important to comply with all tax obligations to avoid penalties and sanctions.
Do not hesitate to contact our teams to ensure that all tax obligations are respected.