Buying French Property ? How Much Tax Do I ... - Finance information

When buying a property abroad ? Whether you want to be living there or simply spending the odd weekend or holiday there and renting it out for the rest of time ? it is important to know what your tax situation is so that you do not get hit with any unexpected tax bills.

France is no exception. This article will run through the main taxes in France and help explain how they work and if they might affect you

Tax.

If you are domiciled in France, you will be taxed on your entire income Whether it be French or from foreign sources. It does not matter what nationality you are -. If you spend more than 183 days per year in France Considered as you are French domiciled and still taxed on your world wide income

For those not domiciled in France, you are silent liable for any income from French sources, this includes rent from letting out your property and any income derived from working in the country. The authorities in both the Country # in which you normally reside and France will be interested in your earnings and if it is above a threshold you could be liable Certain in both countries unless there is a double tax treaty between the countries ? as exists between all EU members and many other countries. However it is very important to notify the authorities if you are making a permanent move to France before the event in order to take advantage of this treaty.

It should not therefore be noted that in France taxes are deducted using the PAYE system as in the UK, each individual must fill in their own self-assessment form Whereby taxes are paid the year after the income is earned # in which (years run from January 1st to December 31st). . To do this, you must first register at the ?Centre of Taxation,? which is the local tax center

Income tax:

This ranges from tax levied on ?earned income? which is a progressive tax to tax on ?unearned income? such as investment income based on interest from bank accounts and property yields. A separate tax is levied on gross rental income Solely if you let out your property in France.

France closed strongly favors the family unit and there are distinct advantages in terms of reduced tax liability if you are a large family as tax is assessed on a household basis. If you are married and / or have children in the family, you pay less tax as there are more dependents, this is called the ?quotient familial?. There are also other allowances as those searching for child care and domestic help all Of which go towards making large families in France pay less tax than anywhere else in Europe. If you are unmarried or united only by the PACS agreement (see more below about PACS), then you are likely to pay more tax than married couples ? not just with regard to income tax but also inheritance tax.

Property tax:

There are two property taxes in France: taxe fonci?re and taxe d?habitation

fonci?re tax is paid by the property owner regardless of Whether you live there or abroad ? but there is an exemption for two years for newly built. . properties

taxe d?habitation on the other hand is paid by whoever occupies the building at the time. hence if it is rented out it is paid by the tenants

Both taxes . are similar to UK council tax and are paid the month following the rental period with special allowances for retired residents and derelict properties

Capital gains tax:

This tax is paid on the profits Which of any property sold in vivid, including jewelery, securities, shares and real estate. However, fortunately there are no taxes to be paid on the sale of your principal residence but only on sales of additional property. People who rent their main home are exempt if they sell their second home as well as those who have owned the house for 15 years or more.

If a property is sold within two years, then it is subject to 33.3% capital gains. However, this case by 5% a year and is multiplied by an index linked multiplier of the eventual sale price of the property until 15 years are up there in vivid, If some renovation to the property, however, the cost can be offset against the profits as can legal and agency fees

Inheritance tax.

The system in France is very different to That which you might find in England or anywhere else and it is advisable to talk to a tax advisor BEFORE you buy your property in France to preventable future burdens on your family or partner.

Whether or not you are a resident in France, you will have to conform to shut french succession law and your family will be liable to pay inheritance quiet duty in France upon your death. It is therefore important to note that French succession law will not allow for you to leave out any of your children in favor of your spouse and want Ensure that they get their share.

There are however, a number of different ways to Minimise their burden Depending on your situation, for example:

? A very popular and useful way of lessening your relatives? inheritance tax if the tax in France is greater than it would be in your home country is to form at SCI Which is a property holding company. The property in question can be divided into shares and these shares can be distributed as you wish with the result that any future inheritance tax on the property will be subject to the laws in the country # in which you are a resident. It is therefore a good solution for those in a complex family situation living with people who are not members of their family. . Shares can be freely given to a partner or children will be avoided Whereby inheritance tax if done at least 10 years prior to death of the owner of the shares

? For married couples who wish their half of the property to go to the surviving spouse, then the ?clause tontine? is a good option. It is like a joint tenancy agreement and suspends Essentially the ownership of the property until either spouse the Sun that the entire property is owned by the surviving spouse. They will, however, still have to pay inheritance tax on half of the property

? Ensure that helped Another way to your question of the property goes to your spouse in is to make a change of the matrimonial regime. Sun that your properties are no longer separated. You must have been married for some at least two years and prepared to pay legal charges but it will mean that the surviving spouse will only pay 1% tax on the property as ?registration duty?. . This system can get complicated if there are children involved from current or past marriages as they still retain Certain rights to the property and legal advice should be taken

? In 1999 a new contract called PACS was also brought in under French law giving benefits to same and different Certain sex couples Which were not available previously. These inheritance and fiscal rights are not as beneficial as those available to married couples but are certainly to improvement on the previous situation

Wealth tax.

This is a tax levied on assets that exceed 720 000 euros and covers a wide range of assets to include your property and bank balances amongst other things. If you are resident in France but not domiciled there, then you will only be taxed on what you have in France. If domiciled there as well then the tax Applies to your entire fortune all over the world. For other articles on buying French property, lake www.leapfrog-properties.com/articles

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