When purchasing a property in France, it is essential to consider the tax efficiency of the acquisition structure at an early stage and preferably before signing the pre-sale contract. We can advise you on the tax implications of your property sale or purchase in France and on the most tax efficient purchase structure.
In addition to the stamp duty, three main taxes should be considered when purchasing a property in France: Inheritance Tax, Wealth Tax and Capital Gains Tax.
Other taxes must also be addressed such as Income Tax if you intend to rent out your property or corporation tax if you intend to purchase via a company.
French Inheritance Tax
Even so you choose your national law to apply to your French estate, French inheritance tax will be due upon the inheritance of the property following your death.
In France, inheritance tax is calculated on the basis of the amount that each individual beneficiary receives and how he or she is related to the deceased owner. Therefore, the tax payable will be calculated once the property has been shared between the inheritors.
There is no inheritance tax between spouse. Children benefit from a more generous tax calculation than siblings and any property passing to people who are not blood relatives (ie. Non married couples) is subject to very high inheritance tax (60%). The first €100,000.00of inheritance is tax free for each child. After that the children will pay French Inheritance Tax at a rate ranging from 5% to 45% depending on the value of the share of the estate they will receive.
In France, wealth tax is payable annually by people whose assets exceed €1,300,000.00 on 1st January 2015. The wealth tax rate range from 0.5% to 1.5%.
Non-residents are liable in respect of net French assets held at 1st January each year.
Financial investments (bonds, stocks, life-insurance…) made by non-residents are not subject to wealth tax. However, company shares over 10% of the company capital, stocks or shares of a company who assets include mainly French property assets are subject to wealth tax.
If you are not residing in France, then only the net value of your French property assets will be taken into consideration for the tax.
Capital Gains Tax
The rate of CGT for both French and non-French residents, is 19% in 2015 on the net gain. In addition to the capital gains tax, non-residents must pay since 17th August 2012 social charges at a rate of 15.5%.
The taxation of social charges on non-residents has been recently legally challenged before the European Court of Justice and we expect soon a new legislation on this matter.
In addition to the aforementioned tax rates, since 1st January 2013 a supplementary rate of tax (between 2% and 6%) is also payable on large gains over €50,000.00.
The taxable profit is calculated by taking the difference between the price at which the property is sold, reduced by the selling costs, and the purchase price, increased by purchase costs.
Reductions of the capital gains tax are applied from the 6th year in accordance with a progressive rate. There is Total exemption of the capital gains tax after 22 years.
There is no capital gains tax due if the sold property was your main residence.
Double Taxation Treaties
When purchasing a property in France, particular attention must be given to any applicable double taxation treaty depending on the country of residence of the purchaser. For instance, capital gains tax may be due in the UK, although French capital gains tax will be taken into account as a tax credit, by virtue of the double taxation treaties in force between the UK and France.
French Tax Claims
If you have paid too much taxes than you should have when selling or renting your property, we can also assist you in claiming the undue taxes back.
For all French Tax related matters, we work in collaboration with a French tax lawyer. For all enquiries related to French Tax, please contact us at email@example.com