Taxes in France

The budget of France for more than 90 % of it consists of tax revenues. Together in France, there are more than 200 types of taxes, fees, duties and other mandatory payments; their rates and terms of collection are reviewed annually.

Taxation rules applicable to the payer, will largely depend on whether it is a tax resident of France or not.

In France tax residents are those who have French domicile, or permanent place of residence. In accordance with French law, regardless of nationality domiciled in France, confesses that,

• whose principal place of residence or family are in France;
• who carries out a professional activity (paid or not) in the country, except when such activity is of an auxiliary nature;
• whose center of economic interest, i.e. major investments, legal address of the enterprise, the center of professional activities is located in France.

As a General rule, residents pay taxes to the French Treasury on all their world income: income from business and professional activities, royalties, income from real estate transactions income received in the form of dividends and interest. Non-residents pay taxes only on assets located in France, and on the other received in France, the income.

Between France and the Russian Federation have an Agreement on avoidance of double taxation, which allows the Russian tax resident to avoid paying tax in respect of the same income twice. That is, the amount paid in France, income tax and tax on capital gains can be offset in calculating the amounts of taxes payable according to the rules of the Russian legislation. The property tax, in accordance with the Agreement, shall be payable only in France.

Taxes when buying property

When buying a home built over five years ago, the state budget and in the budget of the departments and communes, the buyer pays the registration fees (les droits d’enregistrement). The total amount of registration fees is of 5.81 % from vстоимости the purchased object (in the departments of Indr, isère and Morbihan is 5.1 %).

When you buy a house is paid the value added tax (la taxe sur la valeur ajoutée, TVA) in the amount of 20 %, which is often included in the cost of the acquired property and the fee in the amount of 0,71498 % of the project cost.

The cost of notarization of the transaction is calculated based on the value of the object.

The rates of the notary fee
According to Credit Suisse

Taxable the value of the object, thousand euros	Rate
To 6500	3,945 %
6 500 – 17 000	1,627 %
17 000 – 60 000	1,085 %
More than 60 thousand	0,814 %

For example, if the buyer gets an apartment with a total value of 200 thousand Euro, for the first 6.5 thousand euros the notary fee in the amount of EUR 256,425 for the next 10.5 thousand Euro 170,835 Euro, then — 466,55 of 139.6 euros and 1 Euro respectively. In the end, the amount of the notary fee is 2 euros 033,41.

Taxes on possession of real estate

The owners annually pay a property tax(la taxe foncière), room tax (la taxe d’habitation).

The size of the estate tax depends on the size and location of the real property and is set by the tax authorities in accordance with the cadastre and on the basis of the rental cost. The residence tax, in accordance with French law, paid for by those who occupy accommodation on 1 January of the current year or the owner or tenant.

According to Lara Paranan, Director of the Department of Eastern Europe AS et Associés, the rate of property tax per year equivalent to 0.5 month’s rent, if the city, which is housing, there are companies. In economically weaker localities rate equal wages for 1.5 months. I do not mean the market rent, and the conditional, which is calculated on the basis of average prices for conventional and social housing, and is much less than the market. Taxe d’habitation also depends on how well filled the coffers of the city. In the most “backward” municipalities its size is equal to “conditional” monthly rent.

For example, in the suburbs of Paris, where there are enterprises with the owner 100 m2, the market value of which is 500 thousand euros per year is spent 800 euros for taxe foncière and the same for taxe d’habitation. Another example: in the suburbs of Paris, where there is no business, the owner of the property (100 m2, 180 thousand euros) is to pay 850 euros per year taxe foncière and 900 euros for taxe d’habitation.

“Buying a property is necessary where there are enterprises — in the suburbs of Paris (North-West), in the capital, on the coast (there is a well developed tourist infrastructure) and in the mountains. In places with lower taxes, but housing is more expensive — all natural. For example, in the East of Paris absolutely no tax thanks to the Disneyland,” says Lara Paranan.

According to her, the owners of the primary property is exempt from tax in the first five years. The main condition is to correctly complete all necessary paperwork, and that is the concern of realtors.

In addition, those whose assets have a value exceeding EUR 1.3 million, to pay the wealth tax or the solidarity tax to the state (l’impôt de solidarité sur la fortune, ISF). Subject to tax any real estate owned. Rate of this tax depends on the value of the property.

The rates of the notary fee
According to Credit Suisse

Taxable the value of the assets thousand euros	Rate, %
To 800	0
800 – 1 300	0,5
1 300 – 2 570	0,7
2 570 – 5 000	1
5 000 – 10 000	1,25
More than 10,000	1,5

The wealth tax only applies to individuals and their families. Lonely people pay ISF separately, spouses, cohabitants, and persons who have concluded a civil solidarity agreement (PACS), together. The property of minor children taxed together with the property of their parents.

Taxes on income and profit

The maximum income tax rate (l impôtsurlerevenu) reaches 45 %. In addition to the basic rate owners of very high incomes (over € 1 million) pay an extra 3-4 %.

Income tax rates in France

Income, Euro	Rates, %
Up to 5 963	0
5 964 – 11 896	5,5
11 897 – 26 420	14
26 421 – 70 830	30
70 830 – 150 000	41
150 001 – 1 000 000	45
Over 1 000 000	48-49

Owners wishing to enrich themselves at the expense of putting property to rent, are required to pay tax on rental income (l’impôt surle earnings locatif). The tax base is the rental income less cost of rental. Rates can vary from 5 to 45 %. In respect of the resident applies a flat rate of 20 %.

In addition, for non EU residents to this tax added the social charges (prélèvements sociaux les), the rate of which amounts to 15.5 %. Thus, the maximum rate of rental income for non-residents is 60.5 %.

Landlords who rent their premises with the area less than 14 m2 30-45 euros/m2 or more (the amount depends on the municipality), pay an annual tax. The rate of this tax for the furnished studios is a maximum of 10 %.

The tax rate on rental income
According to Credit Suisse

Taxable the value of the assets thousand euros	Rate, %
Up to 5 963	5
5 963 – 11 896	10
11 896 – 26 420	15
26 420 – 70 830	20
70 830 – 150 000	41

There is also a tax on vacant property (la taxe sur les logements vacants, TLV). They are subject Unfurnished property located in the municipalities with population over 50 thousand people. If such property is not occupied for more than a year, the rate is 12.5 %, starting from the second year — 25 %. The tax on imputed rental income, which is calculated on the basis of the market based on the characteristics of the object. View a list of communes in which there is a value of empty property on the site Legifrance.gouv.fr.

Furnished housing available for short term (LMCT, location meublé terme ecourt), the annual income from which exceeds 32.9 thousand euros falls under the category of benefits (bénéfices industriels et commerciaux, BIC) because the income from the monthly rent are considered by the tax authorities as industrial and commercial activities.

In this case, social contributions and related taxes only 50% of the amount of income received from renting furnished accommodation for short term rental.

As an alternative of rental income can be deducted:

• borrowing costs (interest, processing fee statements, etc.);
• insurance premiums;
• the costs associated with the office;
• the costs associated with the purchase, maintenance and repair (less than 500 Euro);
• personal expenses;
• the costs associated with the acquisition of real estate (Agency fees and notary);
• fees charged by condominium.

Also, the tenant may be exempted from the payment of local taxes (e.g. property tax).

Rental income derived by companies is taxed at the rate of 33.33 % of earned income minus expenses and depreciation. This tax is imposed Unfurnished housing available for long term rent (minimum three years).

Owning French real estate is owned by the company, is associated with the payment of the annual tax to indirect ownership, which is paid at a rate of 3 % of the market value. It is paid by almost all entities. The purpose of this tax is to counteract tax evasion on luxury, capital gains and inheritance.

However, for example, civil company real estate (la société civile immobilière SCI) are exempt from this tax, as are obliged to disclose their shareholders at the request of the French tax authorities. Exempted from payment of tax and other French or foreign companies registered in countries that have an agreement with France on the disclosure of information about all the shareholders of the company.

Taxes when selling

The difference between the price at which the object was purchased, and the price at which it was later sold, the taxable capital gains (l’impôt sur les plus-values immobilières).

The first sale of real estate by residents may be exempt from tax on capital gains.

The estate of non-residents is considered as a secondary place of residence and, accordingly, are subject to tax on capital gains.

For EU residents the rate of tax is 19% for Russian tax residents is 33.33 %. If a non-resident of France is not resident in the cooperating States, such as Brunei or Guatemala, the rate is 75 %.

If the property is sold after five years after the acquisition, the tax is reduced for cardigo possession of more than five years. When selling after more than 22 years, the property is automatically exempt from this tax. To determine the tax base of the sales price is deducted, the purchase price and expenses.

When selling a home in France, ex-resident capital gains (in the amount of not more than 150 thousand euros) is also exempt from tax. To do this, the taxpayer must be a resident of the country for two years before leaving, and housing sold within five years.

When selling a property, if the income exceeds 50 million euros, and must pay an additional tax, whose rate varies from 2 to 6 %.

Inheritance tax

In accordance with the laws of the country French estate in the possession of a non-resident is subject to inheritance tax (l’impôt sur les successions).

French inheritance tax is calculated based on the value of the property. Tax-exempt property which passes from one spouse to another. When you transfer real estate in nasledstvom parent-to-child rates are applicable from 5 to 45 %. In case of transfer of the inheritance to the brothers and sisters apply rates from 35% to 45 %, nephews and relatives to the fourth degree of kinship — fixed rate 55 %, and the persons consisting in relationship with the testator, at 60 %.

To legally avoid paying inheritance of malagana, it is recommended to issue property to the company. In this case, will apply the laws of the country the resident of which was the owner.

The rate of inheritance tax
According to Credit Suisse

Taxable the value of the assets thousand euros	Rate, %
To 8 072	5
8 072 – 12 109	10
12 109 – 15 932	15
15 932 – 552 324	20
552 324 – 902 838	30
902 838 – 1 805 677	40
More than 1 805 677	45

Please note that the above presents only basic information about taxes in France. To understand the nuances, to determine the exact amount of taxes and their optimization will help you a certified specialist in taxation in France. Tranio strongly recommends that you consult them before signing the deal.