While not a joy to think about, with a little planning, they might feel like less a thing of to dread, taxes. Today, we look at the specific taxes you can expect to pay as the owner of a French property.
When you purchase a French home, it is advisable to budget for 10% on top of the price of the property for the costs of buying. This 10% will account for notary fees, personal taxes, wealth tax and property taxes. In France, the notary plays a key role in the legality of a property purchase. They check the validity of the transaction, draft and authenticate contracts, collect taxes and oversee the transfer of property ownership. Notary fees are set by the government and paid by the buyer.
If you are buying a resale property, then the amount you will pay is based on the cadastral value of the property that you buy. This will be about 7 – 10%. Not all of this money will go straight to the notary, it also includes costs such as stamp duty and land registration.
In the case of new builds, you will pay VAT at 20% - though this should be included in the purchase price as TTC (Toutes Taxes Comprises).
After your purchase: property taxes
There are two main types of property tax that French ski home buyers will want to be aware of: taxe foncière and taxe d’habitation.
Taxe Foncière
Taxe foncière is similar to UK council tax. It is payable in October each year. All owners of a French property are liable to pay taxe foncière, whether or not they rent out their property. The tax applies to all residential, commercial and industrial properties.
Taxe foncière is calculated based on the location of the property, its plot, size and condition. The amount that you will pay varies as it is dictated and collected by local councils across France. The tax goes towards local services, within the commune and department. Often, the charge also includes fees for waste disposal.
Generally, you will pay the first demand in full, about a year after your property purchase. After that, you can arrange to pay in monthly instalments with your local tax office. Late payment can mean a penalty fee of 15%.
Usually, the notary will let the tax office know that you have purchased the home, but you may want to check this is in place.
Exemptions
New builds, additions to existing buildings and rural conversions are exempt from taxe foncière for two years. However, the works will need to be declared to the tax authority within 90 days of completion.
Additionally, if you are thinking of renovating an older chalet and improving its energy efficiency to levels higher than currently enforced, you could be eligible for a 50 – 100% exemption for up to five years. There is a different criteria for properties built after 2009. You will need to talk to your local tax office about your unique circumstances.
There are additional exemptions for landlords having significant work done to their property that makes it unhabitable for a period of time, as well as disabled and elderly homeowners.
Taxe d’habitation
Taxe d’habitation is a key tax for second homeowners in France to be aware of (and pay). It used to be that taxe d’habitation applied to all properties, but since January 2023, it has just been applied to second homes and related structures (garages and outbuildings). If you have two or more properties in France, taxe d’habitation will not apply to your chosen primary residence, but it will to your other properties. Equally, if your primary residence is abroad, say in the UK, and you have a ski chalet in the Alps, you will be liable to pay taxe d’habitation.
The tax is levied, and the rate is set by local authorities, with the money collected going towards community services. There are designated ‘zone tendue’, areas where there is a known housing shortage, if you own a second home in one of these, you could face additional charges.
If you have a second home that is a long-term rental, and effectively, is someone else’s home, then it is the primary residence of the tenant. Therefore, you will not pay taxe d’habitation. The tax is aimed at properties that are used as short-term rentals or just sit empty for a vast amount of the year.
All French property owners, including those living overseas, must fill out an annual tax declaration form, the Declaration d’Occupation, which can be done online. This form is used to determine if the property is a main or secondary residence, and how it should therefore be taxed.
Managing your currency risk, as well as your property taxes
For overseas buyers, keeping on top of French property taxes will inevitably require a transfer of their home currency into euros. Constantly shifting currency markets can make it difficult to predict how much money to send across. Fortunately, you can take the stress out of this by engaging a currency specialist, Smart Currency Exchange. They can organise a forward contract for you, fixing the exchange rate for twelve months. Plus, they could arrange a forward contract with a regular payment plan that would automatically send money across to your keep your French property taxes paid on time.
