Before starting to look for a property on which to invest your capital it is very important to contact an expert, in this case a specialist in the French fiscal system. The tax expert is a figure who provides to the customer assistance and advice on tax matters. We therefore decided to interview Mauro Michelini, Founder and CEO of the Michelini Studio, as he is able to offer the best answers in the field of French real estate taxation for people who hold or are interested in buying a real estate property in France.
Which are the recurrent fees that have to be paid in case of the possession of a property in France?
The recurring fees to pay in case of the possession of a real estate property in France are:
1) the “Taxe Foncière”, that is charged to the owner; it is payable in the municipality where the property is located. It is calculated basing upon the value of 50% of the cadastral income to which a rate that varies according to the municipalities is applied and which is different from the one previously applied to the “taxe d’habitation”.
2) “Taxe d’habitation”, It is due by the physical persons who occupy the apartment on January 1 of the current year. This tax is charged to the tenant if the lease is annual. In case of seasonal rentals, the tax is to be paid by the owner. It is calculated on the basis of the cadastral income.
3) The IFI( Impot sur la fortune immobilière) , It is the real estate tax, created for people who hold real estate assets valuable as more than 1.3 million euros. Replaces the solidarity tax on fortune. The amount of the IFI to be paid is obtained by applying the following progressive tiers to the total value of the taxable assets:
• Up to 800.000 € ---------------------------------- 0%
• From 800.000€ up to 1.300.000 €------------ 0,50%
• From 1.300.000€ up to 2.570.000€-----------0,70%
• From 2.570.000€ up to 5.000.000€-----------1,00%
• From 5.000.000€ up to 10.000.000-----------1,25%
• More than 10.000.000---------------------------1.50%
4) The television license, (la redevance audiovisuelle) Is payable by those subject to the residential tax.
To which taxation is the foreign citizen subject in case of the sale of a property?
Are there any taxes on capital gains? The tax on capital gains in France is called “called impôt sur les plus values” and corresponds to the tax payable on the sale of land and buildings. The imposition tax rate is 19% by IR (Impot sur le Revenu), plus a further 15.5% because of CSG + CRDS taxes. (Contribution Sociale Gènèralisee e Contribution au Remboursement de la Dette Sociale), these taxes can be equated with additional income taxes, for a total tax of 34.5%. The capital gain is equal to the difference between the selling price and the purchase price; several costs are fully deductible from the sales price, for example, sales commissions, mortgage exemption, architect’s fees and restructuring costs (duly documented), or alternatively a forfeit a percentage that can go up to a maximum of 7.5% for the costs of acquiring the value of the asset and up to a maximum of 15% of the value of the asset for the expenses of improvement. Furthermore, there is a further fixed tax reduction starting from the 5th year which is calculated as follows: -0% - Less than 6 Years -1.65% - From 6th Year to 21st year -9% - From 25th year to 30th year The property will be exempted from the “impôt sur les plus values” starting from the 30th year of possession.
What are the income taxes on a property?
1) Property not located available to the owner: In case that the property is not rented and remains available to the owner, there is no imposition to the IR, as there is no property income. However, the “Taxe foncière”, the “Taxe d’habitation” remain charged to the owner. The owner must also take care of the IFI (Impot sur la fortune immobilière) if his assets are more than 1.3 million euros.
2) Rental of unfurnished apartments: This is a property rented but not furnished (there may be a kitchen and some nonessential furnishing items). This includes the physical persons who rent one or more unfurnished apartments located in France, in this case, one is subject to income tax (unlike the properties available) at the rate of 19% + 17.2% of social contributions (“prelevements sociaux”). In this case the “Tax Fonciere” is paid by the owner while the “Tax d’habitaciòn” remains in charge of the tenant in case of annual rents, The IFI remains to be paid in case that one’s assets exceed 1.3 million euros. There are 2 different types of tax regimes:
• Foncier System: Simplified accounting regime: taxable income is the difference between revenues and costs (excluding depreciation)
• Micro Foncier System: Forfait scheme: for annual rentals not exceeding 15,000 euros with a 30% reduction on the collected rent.
3) Rental of Furnished apartments: This is a rented and furnished property, also in this case, it is subject to income tax at the rate of 19% + 17.2% of social contributions (“prelevements sociaux”). As in the previous case, the “Tax Fonciere”, and the “Tax d’habitation” are to be borne by the owner only if the rent is seasonal, The IFI must be paid by the owner in the event that its assets exceed 1.3 million euros.
• Bic System: Simplified accounting regime: taxable income is the difference between revenues and costs (including depreciation)
• Micro Bic System: Lump-sum arrangements: for annual leases lower than 70,000 euros with a 50% reduction on accrued rentals.
Are there any inheritance taxes in Paris?
According to the French-Italian convention against double taxation on tax successions and donations and more particularly according to art. 5 and 6, in case that the defunct was resident in France while the heir was not a tax resident in France, the whole succession is subject to French tax estate. The properties are valued at the venal value on the day of the donation. Starting from the 22nd of August 2007 there is a total tax exemption in the successions between brothers and sisters under certain conditions: be unmarried, be over 50 years of age and have lived continuously with the deceased during the last 5 years that preceded death. Furthermore, a total exemption on spouses’ succession was introduced.