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Real estate taxation and wealth tax

Published on October 21, 2014
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TAXATION ON REAL PROPERTIES

♦Sales of construction lots and buildings built within five years of their completion are subject to VAT. Land sales that do not meet the definition of building land and the sales of buildings occurring five years after their completion are exempt from VAT.

VAT rules applicable to real estate transactions have been defined in the Administrative Instruction 3 A-9-10 of December 29, 2010.

♦ Notwithstanding the rules applicable to VAT, sales of real property is normally subject to a levy which rate is fixed at 5.09%. However, sales that are subjected to VAT in full on the total sales price benefit from a reduced rate of 0.715%.

- I have a house in France I keep for my personal use. Do I have to pay local real estate taxes ? How are these taxes assessed?

Two local taxes applied to real properties in France:

Residence tax: (taxe d’habitation) : this tax is due by any person who uses a furnished property. If the property is inhabited or if the tenant did not pay the tax, the owner is liable for its payment. This tax is calculated by applying the rate set by local jurisdictions and based on the official Land Registry rental value. The residence tax is assessed on a yearly basis. The tax is due on January 1st of each year. No rebate is granted if the property is sold or if the occupant moves out during the year. Non-residents cannot benefit from any reduction or relief.

Real estate tax: (taxe foncière): This tax on lands and buildings is assessed on a yearly basis. Is is due by any person who own a property on January 1st of each relevant year. New constructions benefit from a two year temporary exemption. The real estate tax is also based on the official Land Registry rental value.

Married couples are subject to joint taxation, as well as those bound by a PACS and people living in cohabitation (regardless of gender).

- I wish to sell a real property I own in France? What are my reporting obligation? How is the capital gain tax computed?

Capital gains on real properties are generally submitted to the income tax. However, exemptions exist, especially when an individual, resident of France, sells his/her main residence or when a non-resident individual sells his/her main dwelling located in France (when conditions are met).

For more information (including the tax rules for the taxation of the gain realized by a nonresident upon sale of real property located in France):

Plus-value immobilière - Service-public.fr (in French)

Information on the sale of real estate properties located in France by a non-resident of France

WEALTH TAX

The solidarity tax on wealth (ISF), or Wealth Tax, is an annual tax payable by individuals whose total value of assets is greater than 1.3 million Euros. This value must be assessed at the household level on the 1st of January of the tax year.

The assets to be reported include all movable and immovable, property belonging to members of the household, that are located in France or abroad.

Individuals domiciled outside France shall be taxable only at the ISF for their properties in France with the exception of financial investments within the meaning of Article L 885 of the Code Général des Impôts that are specifically exempt.

Special rules on wealth tax with respect to non-residents of France

Total net assets whose net worth is equal or superior to 1.3 million euros will be taxed according to a progressive tax scale starting at 0.5% for an estate valued between 0.8 and 1.3 million Euros, and reaching a rate of 1,50% for estates valued at more than 10 million Euros.

Reporting requirements are simplified. Taxpayers whose net worth is less than 2.57 million euros will be exempt from filing a wealth tax return and must report the taxable net value of their assets directly in a special box on their income tax return, without having to provide notice of any evidence of debt and/or tax cuts. They will receive a wealth tax notice separate from the income tax notice, and starting in 2013 they will be able to choose to pay via a monthly withdrawal on an account in France.

Taxpayers whose estate net worth is superior or equal to 2.75 million Euros, for their part, must file an Wealth tax return that includes their payment and supporting documents.

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