Comprehensive Guide to French Property Tax for UK and International Buyers
Domosno’s Comprehensive Guide to French Property Tax for UK and International Buyers
Domosno, a company with more than 20 years of expertise in selling ski properties in the French Alps, presents a detailed guide on the key tax considerations for UK and international buyers.
New laws can be voted, and things can change, and we do not pretend to replace a French law specialist.
In-Depth French Taxes Overview
Income Tax
- 30% Rate on Net Rental Income: In France, a basic rate of 30% is levied on net rental income. You can deduct all the costs related to the rental management of the property including French mortgage interest if you have one in place. You also deduct 1/25th of the property value (amortisation value) each year from the rental income. France is very advantageous to holiday-let landlords unlike other countries. This income should also be declared in the buyer’s home country. To navigate this, many buyers consider using a company structure, which offers advantages in terms of inheritance tax and reducing income tax payable on the rental income.
Capital Gains Tax (CGT)
- Basic Rate and Additional Charges: The basic rate for CGT in France is 19%, with an extra 17.2% for social charges. Additionally, there is a 6% rate for gains exceeding €250k. Strategies to reduce this tax include utilizing structures such as an SCI, SARL de famille, or SNC. Domosno can introduce clients to professionals who can provide detailed advice on these matters.
Property Tax
- Annual Levies ‘Taxe Foncière’ and ‘Taxe d’Habitation’: These are calculated based on the property’s size, with ‘Taxe Foncière’ generally around 15€/m2 per year (750€/year for a 50sqm property). The ‘Taxe d’Habitation’ is very similar in amount to the taxe foncière and second-home owners need to pay it.
Property Wealth Tax (IFI)
- Annual Net Value-Based Tax: This tax is based on the net value of real estate held in France, calculated on the expected market price as of January 1st each year. Deductions are available for initial purchase loans or renovation loans. The tax rates vary from 0% to 1.5%, starting at a net asset threshold of 1.3 million euros.
Inheritance Tax
- Subject to French Law with Exemptions: While real estate in France is liable to French inheritance tax for the French, not for most countries with a double taxation treaty like the UK. If you are from the UK you will pay UK inheritance tax. Also, company structures can be used for transferring gifts during one’s lifetime. This is particularly relevant for countries with a double taxation treaty with France.
Tax Optimisation Through Corporate Structures
- Personal Ownership
- While tax-efficient in France, this method makes it harder to transfer property shares to children. Rental income is likely not taxed in France, but will be taxed in the UK. Potential structuring under the UK’s ‘furnished holiday let’ rules should be carefully examined.
- Unfurnished Rental or Optimized Family Home
- An SCI (a type of private limited company in France) is often utilized. It’s transparent for French tax purposes and opaque for UK tax purposes, allowing for income sheltering in France through deductions like loan interest and a portion of the property value. SCI shares can be transferred to children.
- Furnished, Seasonal Let and Family Home
- The SARL de famille is a structure intended for close family members. It’s transparent for French tax, allowing owners to use personal tax allowances, but opaque for UK tax, meaning income isn’t taxed until repatriated to the UK. The shares in the company are transferable, aiding in inheritance tax mitigation.
Important Considerations
- This guide provides a general overview and should not replace individualized tax advice. Buyers are strongly advised to consult with qualified professionals for tailored advice.
- Domosno can facilitate connections with experts for in-depth tax guidance.
For detailed advice or further information, please contact a French property solicitor as we aim to give you some brief advice but we do not pretend to replace personalised legal advice. We are dedicated to assisting you through your property investment journey in the French Alps. As part of our service, we introduce you to a French solicitor (notaire) at no extra cost. 🏔️🏡🇫🇷
