Taxes on French Property

Posted by admin in Property Investment, The Companies, The South of France | September 13th 2005

Disclaimer
Tax and property law are complex. Every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is however intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of French law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.

French Tax on Residential Property

The two principal taxes on residential property are collected by the State for the benefit of the collectivités territoriales, namely the local authorities of the Région, Département and Commune.

What taxes are there?

• The principal taxes are taxe foncière
• and taxe d’habitation. Both apply to all residential property – houses and flats.
These taxes are each assessed at an individual rate voted by each collectivité territoriale. They vary in very substantial proportions from one location to another. The commune rate of tax is often higher in main towns than in suburbs or small villages. Before renting or buying a property it is therefore wise to request details from the estate agent or owner.

(Property used for a business or profession is subject to taxe professionnelle)

What is the difference between taxe foncière and taxe d’habitation?

• In simple terms, taxe foncière is levied from the proprietor (owner) of residential properties situated within France. Property is defined in quite wide terms and includes, for example, boats permanently moored for habitation.
• Taxe d’habitation is also applicable to all residential properties, but it is due from the occupant, whether the occupant is the owner, the tenant or a free occupant.
“Occupation” includes, not only actual daily or regular use of the property, but also if the tax payer has the “possibility” of occupation, meaning: the property is available for his occupation – it is furnished and supplied with water and electricity – even if it is only occupied on brief or occasional visits.

Who is liable to Pay?

• Taxe foncière: the owner of the property on the first day of January is responsible for paying the tax for that year.
• Taxe d’habitation: the occupant (the owner or tenant) of the property on the first day of January is responsible for paying the tax for that year. If the tenant vacates the property during the year and fails to pay, the owner remains jointly liable, unless he notified the tax collector of the new address of the tenant.

How is the taxe foncière calculated?

The tax base is determined by the valeur locative cadastrale. It represents the notional annual rent if the property was let on the open market. However the valeur locative is often substantially lower than the market rental value.

Every year, the valeur locative is multiplied by a factor to reflect the national variation of prices. For the last five years, the resulting increase has been about one percent a year. From time to time the tax authorities review the individual values of properties – the last overall review took place in 1974.

After relief for various allowances, the net base is multiplied by the current tax rates as voted by the councils of the relevant région, département and commune. A collection fee (frais de rôle et de recouvrement) of 2.5 percent of the resulting tax is added for the State.

Two different rates are applicable for developed and undeveloped land called bâti and non-bâti. For residential property the developed area is the land on which the house and outbuildings are built plus a defined area of additional land surrounding the house. A single property, if large enough, can therefore be liable to both taxe foncière bâti et non-bâti and either one or two tax bills may issued.

To accurately reflect changes in values, the property owner must submit a declaration to the tax authorities with details of any material changes, within 90 days of completion. “Changes” include the construction of a building, structural changes to an existing property; a change of use (for example the conversion of a rural worker’s property to a holiday home); but also less substantial work including the addition of a swimming pool or a central heating system.

As a rule of thumb, changes that require the grant of a building permit or a building declaration must be reported to the tax authorities. The changes may be exempt from tax for two years, although that exemption can be lost or reduced in the case of late reporting.

How is the taxe d’habitation calculated?

It is also calculated by reference to the notional rental value of the premises as adjusted.

Are there any discounts or allowances?

The most common for taxe d’habitation is for the principal residence and for dependent persons, for example children; also discounts are granted for the disabled, aged and those on a low income. There are limited allowances against taxe foncière for new and reconstructed properties and for certain additions to existing properties.

What about payment?

Those who are liable to pay taxe foncière or taxe d’habitation are not required to file a yearly return. They will be notified of the amount by an avis d’imposition which will state the amount due and the time for payment. The tax bills are usually received towards the end of August and September for payment by October 15 and November 15.
• Penalties will be imposed for late payment. It is possible to elect to pay by monthly instalments.
If you think the assessment is too high you can try to challenge it. You can obtain information concerning the imposition of the tax by consulting the documents cadastraux at the centre des impôts fonciers. You can also seek to obtain a copy of the fiche de calcul, the calculation sheet to obtain the detailed calculation of the valeur locative (see above for definition). In most cases obtaining information and checking calculations is not easy.
• Reimbursements can be obtained if you are successful in justifying your claim.

What happens when I sell or vacate the property?

If the property is sold during the year, the seller and the buyer often agree to share the tax, by a clause inserted in the conveyance deed and any preliminary agreement. This is however a private arrangement which does not change the legal debtor of the tax, being the owner on January 1.
If the occupant changes during the year, any private arrangement to share the tax with the new tenant (although this is not common) does not change the legal debtor of the tax, being the occupant on January 1.

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