You are considering buying a property in France. Whether it is the purchase of a second home or a real estate investment, what are the taxes and tax returns to which you will be subject?
The total fees and taxes payable will depend on the type of property you purchase
In the case of the purchase of an old property, the total transfer of ownership costs and taxes payable for the purchase of an existing property is between 7% and 10% of the purchase price, excluding real estate agency fees. The amount of registration fees included is 5.80% of the purchase price and in some departments 5.09%.
In the case of the purchase of a property on plan (VEFA) or a property less than 5 years old by a professional, you will pay about 2% transfer fees and registration fees, plus VAT at the rate of 20% on the purchase price, excluding real estate agency fees. The amount of registration fees included is 0.7% of the purchase price.
These fees and taxes are payable at the time of acquisition to the notary in charge of the sale.
Although these fees and taxes are often referred to as “notary fees”, in fact, the actual notary fees (emoluments) are only about 1%. The rest is made up of registration fees and disbursements.
Focus on notary fees in France
JUNE 06, 2018
When an individual buys real estate, he pays what is commonly called "notary fees". Update on these additional costs.
"Notary fees" are actually called acquisition costs. They are composed of taxes and duties, called registration fees. "They are linked to the acquisition of the property and paid to the Treasury. They come back, as the case may be, to the state or local authorities. Calculated according to the value of the property, their amounts vary according to their geographical location ", according to the notaries. The real estate organization SeLoger specifies that "they represent 80% of notary fees. Thus, about 4.5% of the amount of the investment is paid to the department, 1.20% is donated to the municipality, and the State levies, meanwhile, 2.37% of the amount of the transaction.
They are also composed of fees and disbursements. These are sums paid by the notary on behalf of his client. "They are used to pay various stakeholders or to pay the various documents necessary for carrying out the act and its security. These disbursements represent about 10% of the selling price, "says SeLoger. "
And finally, the "notary fees" are composed of emoluments, that is to say the remuneration of the notary. They are fixed by decree. "The emoluments of the notary range between 0.825% and 4% of the sale price depending on the amount of the latter," says SeLoger.
Acquisition fees, improperly called "notary fees", are added to the purchase price of real estate.
They are in principle settled by the purchaser but do not come back to the seller or the notary, for the most part.
What about fees and disbursements?
These are sums paid by the notary on behalf of his client.
These fees and disbursements are used to remunerate the various parties in charge of producing the documents necessary for the change of ownership (mortgage registrar, registration of mortgage guarantees, sales publication fees, urban planning document, cadastre extract, expert surveyor, trustee , etc ...). It is also necessary to take into account certain exceptional costs incurred, at the request of the customer, such as travel expenses.
What about the remuneration of the notary?
The remuneration of the notary properly so called is called emoluments.
The sale or assignment by agreement (number 54 of Table 5) gives rise to the collection of a proportional fee, according to the following scale:
Note 1: "The sum of the emoluments received by the notary for benefits relating to the transfer of a property or a real estate right can not exceed 10% of the value of this property or right" without being able to be less than one floor of € 90 (Article R444-9 of the French Commercial Code in its regulatory part).
This ceiling mainly concerns small-scale property transactions such as land or property located in rural areas, or common areas, cellars and car parks in urban areas. Of course, this ceiling does not concern the tax taxes generated by the transaction.
The remuneration of the notary may be subject to a discount
A discount of maximum 10%, strictly regulated by Article A444-174 of the Commercial Code created by Article 2 of the Decree of February 26, 2016, may be decided by the notary for slices of plates greater than 150,000 €.
In some cases (offices, industrial complexes, social housing, Dutreil pacts ...), this discount is 40% maximum applicable to the part of emolument calculated on the bands of plates superior or equal to 10 million euros.
Discount rates by category of deeds and base bands are guaranteed to all clients of the board and are posted on site.
New or old: different fees
The notary fees are not the same depending on whether you buy a new or old property. In the former, notary fees amount to about 7 and 8% of the value of the property offered for sale.
In the new, these acquisition costs amount "only" to 3 or 4% of the selling price.
As a reminder, a home is considered new when it has never been lived in or is sold off plan (VEFA).
The non-resident Newsletter May 2018
Buying with an SCI in France when you are a foreigner, what tax? What pitfalls to avoid?
Many foreigners, non-residents in France, create an SCI for the purchase of their property in France. What are the tax consequences of this choice? Buy with an SCI? Is it more taxed? The taxes paid on the acquisition of the property by SCI are the same as in the absence of such a company and are not affected by the presence of non-resident partners. SCI will be subject to a tax at the standard rate of 5.90% or 5.19% depending on the location of the building. I buy the shares of an SCI, will I pay more taxes?
You will be subject to a 5% fee, but beware! Taxes may also be levied in your country of tax residence. I was told about an SCI subject to corporate tax and an SCI subject to income tax? What is the difference ? The SCI can be taxed on income tax, its partners are then taxed directly on their share, it can also be taxed on corporate tax as a classic commercial company. For the purchase of property in France, it is most often advisable to opt for a tax on income tax. It should be noted that if SCI leases the property, it will automatically be subject to corporation tax, which may have harmful consequences when the property is resold.
I intend to use on a personal basis the property that my SCI will hold. Are there tax consequences? In France, the practice is very common for an SCI (not subject to the IS) to make available to its partners the property that it owns. This transaction is not taxed in France. Nevertheless, the UK tax administration has a different point of view on French SCI. Under English law, UK SCI associates could therefore be taxed in the United Kingdom on income tax on the basis of a benefit in kind provided by the private use of the company. second home. In order not to be penalized, it is necessary to be well advised during the constitution and management of the company.
Will I have to make an annual tax return in France?
You must declare your income in France only if you earn income in France. The principle is that of the taxation in France of real estate income. All the tax treaties signed by France give the State of location of the property the right to tax these real estate income. It will apply a minimum rate of 20%, and social security for a rate of 17.2% unless the non-resident justifies that his tax rate would be less than 20% if he was a French tax resident and therefore subject to French taxation on all of its global income. It is possible that the non-resident is also found taxable in his own country. Everything will then depend - in the presence of a tax convention - on the clause on the elimination of double taxation. Thus, in Belgium, the tax authorities treat the income distributed by SCI to the partners as dividends, which are taxable in Belgium. There is therefore a case of double taxation: the non-resident taxpayer is taxed in France on his property income and in Belgium on the same income considered in this country as dividends.
I was told about a 3% tax that worries me .... All companies - French or foreign - with one or more properties located in France on 1 January of the tax year, are liable to an annual tax of 3%, based on the market value of these buildings. Nevertheless, when an ICS subscribes each year a declaration n ° 2072Il, it is exempted from it. Will I be subject to the IFI (Real Estate Tax)? Non-resident partners of our hypothetical ICS may be liable to the IFI if the net amount of their real estate assets in France is greater than 1,300,000 euros. The interposition of an SCI is not significant. Acquisition through SCI can be a problem for a Swiss resident. Indeed, some Swiss cantons may provide that the shares of SCI - yet exempt in France - are taxed in France, even though a direct holding would have allowed the property to be taken out of the Swiss taxable base.
What will I pay as tax when reselling? You are likely to pay a tax on the real estate gain. The sale of the property in France is still taxable in France. For the calculation of the IR, the rate of the levy is fixed at 19%. It applies in the event of the sale of the shares of the SCI, by its nonresident partners natural persons and the SCI, in case of sale of the property. The additional tax of 2% to 6% will also apply. French-source property income of non-residents is subject to social security contributions.
And if I give or transmit by succession my SCI? In an international context, the inheritance or donation of real estate assets located in France is often taxable in France. The shares of SCI and the current accounts of this company are concerned. International conventions are rare, but some can be very interesting because they can deprive France of its right to impose, as for example with Belgium, Spain, Bahrain, the United Arab Emirates, Saudi Arabia ...
2017 balance sheet of real estate climate in France
Notaries in France have published their real estate report allowing a review of the year 2017. 965,000 transactions were made over twelve months (against 969,000 at the end of January 2018), for a rise of 10.9% over a year. "The annual volume of transactions is changing at a slightly slower pace (...) and notaries now attend a soft landing, suggesting more reasonable volumes in 2018," note the notaries. • Rising prices - The price increase was particularly felt for older apartments in Île-de-France. • Increase in loans - Outstanding loans to housing continue to grow (5.8% year on year) and borrowing rates remain low (1.61% on average). • Increasing the age of acquirers - The share of buyers aged 60 and over increased steadily between 2007 and 2012, from 13% to 17% for all older homes combined.
News from non-residents
Expatriation and sale of the principal residence
When selling his principal residence, a French tax resident is totally exempt, regardless of the amount of the capital gain generated. In the case where a person, having just expatriated sells his only residence in France, the French tax administration denies him the benefit of the total exemption of tax on the plusvalue. She considers that this person left his main residence before the transfer and ceased to be fiscally domiciled in France. It is then possible to benefit from the special exemption available to non-residents who have resided in France for two consecutive years and who sell their property for the first time in France, but this exemption is limited to 150,000 € of capital gain. When questioned, the Constitutional Council stated that these provisions did not violate the principles of equality before the law and before public offices. As part of a project for expatriation and sale of real estate, it is therefore advisable to sell before departure from France if the taxable capital gain is greater than 150,000 euros.
BUY IN INDIVISION IS IT A GOOD IDEA?
A recent judgment of the Court of Cassation of January 10, 2018 reminds the need to keep the accounts in a joint purchase. An indivision can exist especially when two cohabitants buy a property together or for example, two brothers. What are the constraints imposed by an indivision purchase?
It is necessary to keep the accounts well.
In the case cited, two persons in joint ownership had purchased land specifying in the authentic act that they belonged to half of each. The financing of the construction of the house on this land did not respect this distribution, one of the co-owners having contributed more than the other. The Court of Cassation recalled that, regardless of the final contribution of each, the sale price was to be divided according to the proportion provided for in the act of acquisition of the land, ie half of each. The co-owner who has contributed the most can claim the refund, but he must provide proof of payment by his personal funds. Indivision therefore requires the accounts to be kept between the co-owners in such a way as to respect, in the financing of the works, the proportion stipulated in the act of acquisition.
It is necessary to get along well.
Acts useful or necessary for the preservation of the property (for example, emergency repairs or the taking out of an insurance contract) may be performed by an undivided co-owner. On the other hand, acts of administration, that is to say acts of day-to-day management (including the conclusion and renewal of residential leases and professional leases) must be taken by a two-thirds majority of the rights indivis, All decisions taken by a two-thirds majority must be brought to the attention of other co-owners. Unanimity is in principle compulsory for all other acts: renewal of a commercial lease, decision to sell the property or to carry out non - emergency work, etc.
To avoid cases of blockage, since May 14, 2009, the sale of an undivided property may, under certain conditions, intervene by a two-thirds majority of the undivided rights: the owner or owners of at least two thirds of the rights undivided persons must express their intention to sell to a notary. In the following month, the latter must inform the other co-owners. If one or more of them oppose the sale or do not appear within three months, the notary notes in a report. The court of first instance can then authorize the sale of the property if it does not involve an excessive infringement of the rights of the minority. The sale will be mandatory at auction. Indivision is heavy and constraining. It is often advised by the notary to resort to the constitution of a real estate company for the purchase of a property with several to allow a simpler management of the accounts and to give expanded powers to the manager allowing him to administer the property.
Which provincial cities have the most dynamic real estate market?
The study of the evolution of real estate market prices between 1997 and 2016 in provincial towns shows a great disparity. If Bordeaux sees its prices triple on the market of old houses and old apartments, Orleans has a price increase much more moderate. The three most dynamic metropolises are Toulouse, Lyon and Bordeaux, while Brest, Dijon and Orléans are on the march.
In the following lines, you will find a brief summary of the tax regimes and schemes applicable to seasonal rentals in France. You will equally find the novelties in social matters applicable in France since 1 January 2017.
Revenues from the furnished rentals are commercial in nature and fall under the category of Industrial and Commercial Profits.
The profit is taxed according to the scale in force for French residents (+ CSG CRDS of 15.5%). Non-residents are subject to a minimum tax rate of 20% (+ social contributions of 15.5%).
Moreover, if the hirer provides in addition to the rental of para-hotel services, he will have to charge VAT. However, there is a VAT deductible scheme if the para-hotel hirer carries less than € 82,800 in revenue per year.
Since January 1, 2017, furnished renters making more than 23,000 € in revenue per year are treated as social professionals and are required to pay contributions.
The contribution rate and the basis of calculation depend on the renter’s tax system:
Mr. X receives € 25,000 in seasonal rental income. His rents being less than 33.100 € per year, he decides to opt for the “micro” scheme. Its social charges will represent 22.7% x 25.000 € = 5.675 €.
The following year, Mr. X decided to opt for the real regime:
Annual Revenue: 25.000 €
Annual deductible expenses: 16.000 €
The basis for calculating social contributions will be € 9,000, its social security contributions should average € 4,050.
If the result of the rental activity is zero
The renter may find himself in the situation where his rental income will exceed the threshold of 23,000 € but because of the importance of his expenses, his result will be zero. If he is affiliated to the IHR, he will still have to pay the minimum contributions. According to the website of the RSI, these contributions amount to 1,198 € in 2017.
Several cases can be distinguished:
Let us verify, if our forecasts of the real estate market made at the end of 2016 turn out to be correct in 2017.
Meilleursagent publishes the 89th edition of its monthly barometer of residential property prices in the ten largest cities in France.
Although the recent rise in mortgage interest rates remains contained, creditworthy households are accelerating their purchases to benefit from the windfall. Some very good records benefit from even lower rates up to 1% over shorter borrowing terms.
However, candidates for home ownership are fully aware that the exceptionally cheap credit will not last; As evidenced by the upward movement in rates recorded since the end of last year in the vast majority of lending institutions.
In addition, households are also faced with the recovery – confirmed and accentuated in this March barometer – of the rise in real estate prices in most major cities. “Under these conditions, buyers feel they need to accelerate their purchases before rates go up when prices are already climbing,” explains Sébastien de Lafond. What they do not pay to their banker through the low rates is partly in the price of the good they are willing to pay to the seller. The low rates mechanically fuel inflation. “
More so, than the impact of next less attractive credit conditions, it is that of the rise in prices in the big cities that reinforces the feeling of urgency.
According to the barometer, prices in Paris rose by 2.4% by the 1st of March and the averages are similar to the peaks of 2011. The phenomenon is spreading to the Paris suburbs. In the small crown of the city, the increase reached 1.2% since the beginning of the year and 0.9% in the large corona.
In the capital, anticipate notaries Paris-Ile-de-France, in their real estate conference of February 23: “According to our indicators on advanced pre-contracts, the price per square meter would reach 8,520 euros in April, an Annual increase of 5.6%. “
In the regions, the rise in prices is more or less pronounced according to the metropolitan areas concerned. Two groups are distinguished. The first, like Paris, unites Bordeaux, Lyon and Nantes. These cities are experiencing strong price increases.
Bordeaux, for example, rose by 2.3% in February, up 4.3% from 1 January 2017 to 9% year-on-year. In Lyon, despite a start of the year down, the increase is + 5.4% over the past year. In western France, prices in Nantes climbed 0.8% in February and 2.2% from 1 January and 4.3% in one year.
The second group: Marseille, Montpellier, Toulouse, Strasbourg, Nice and Lille. Prices remain virtually stable with year-over-year increases between 0% and + 2%. In detail, we note:
Marseille (+ 2.1% over one year),
Montpellier (+ 1.7% over one year),
Toulouse (+ 2% over one year and + 0.4% since 1 January),
Strasbourg (+ 1.1% over one year and price stability in February),
Nice (+ 1.3% over one year),
Lille (+ 0.8% over one year, despite the declines in January and February (-1.6% over two months).
In the Lille metropolis, according to MeilleursAgents.com, “these are mainly due to the implementation of the rent framework that limits the hopes of return of investors. “
The taxation in France of international successions or inheritances is provided for in Article 750 Ter of the French General Tax Code.
The following shall be subject to the transfer duties free of charge:
– Movable and immovable property, whether owned directly or indirectly, situated in France, where the deceased is not a fiscal resident in France. Property situated in France and owned by a non-resident may be taxed in France in respect of inheritance tax.
– Movable and immovable property situated in France or outside France, received by the heir or legatee who has his fiscal domicile in France. However, this provision applies only when the heir has had his fiscal domicile in France for at least six years during the last ten years preceding that in which he receives the property. Thus, where the heir of an international succession is a tax resident in France, the entire estate received by the latter is subject to French inheritance tax.
– The deceased is a tax resident in France;In general, inheritance taxes will have to be paid to France if:
– The heir is a tax resident in France;
– The movable or immovable property transmitted is in France;
You will agree that the definition of the person liable for inheritance tax in France is very broad. This situation regularly results in double taxation; In France and in the country of the deceased or heir.
To avoid the risk of double taxation, and to determine the country where inheritance taxes should be paid, many countries have signed tax treaties with France. (Contact us for a specific tax treaty)
It is important to note that the objective of a tax treaty is to avoid the double taxation of the same income, that is to say, where the same person is taxable in respect of the same income, fortune or succession or gift by more than one State.
In a country where there is no inheritance tax (for example Portugal), the tax treaty can not be applied and inheritance taxes will be payable in France.
The sale of works of art is subject to a specific VAT regime. The tax base but also the applicable rates depend on the quality of the seller but also on certain tax options taken by him.
The sale of works of art (within the meaning of Article 98 A II of Annex 3 to the CGI) by the artist or his successors in title is subject, since 1 January 2015, to the reduced rate of 5, 5%. The artist liable to VAT may in return deduct from this collected VAT, the VAT deductible on his acquisitions.
Artists may benefit from a VAT exemption regime if their turnover does not exceed € 42,900 per calendar year. The franchise regime applies to original works produced by the artist, but also to limited reproductions, provided they are signed by the author and numbered. This regime does not apply to the sale of works of other persons, the artist then becoming a trader.
|Type of work or operation||VAT RATE|
Importing works of art, collectors’ items or antiques (from the European Union or not)
|Assignment of copyright (right of representation, reproduction, adaptation, exploitation) and interpretation||10 %|
|Sale of an original work by the author or his successors||5,5 %|
|Sale by a third party (art gallery, merchant, intermediary acting in its own name)||20 %|
|Sale of cultural property not considered a work of art:
– Drawing of architect, engineer and other industrial, commercial, topographical,
– Hand-crafted item,
– Painted canvas for theater decors or studio backgrounds,
– Articles of jewelery, jewelery or goldsmiths’ wares,
– Piece of cabinetry more than 100 years of age (considered an object of antiquity),
– Photographic posthumous proof (not signed or authenticated by the artist).
In this case, there are several scenarios:
The gallery will also be able to opt for a VAT margin scheme: by this option the galleries can request that the VAT be collected only on the profit margin they realize. In this case, they nevertheless lose the right to deduct the VAT paid on the purchase price of the work.
Where it is not possible to determine precisely the purchase price of the transferred work, the galleries may, under certain conditions, calculate the margin at a flat rate by retaining 30% of the sale price, exclusive of taxes, for the work.
Taxation of race horses;
Investment in a racing horse can be particularly interesting. However, among the 8,000 French owners of racing horses, only a handful of them will actually make a fortune. The others, at best, will reimburse the expenses incurred.
Overview of this type of alternative investment.
The foal from the moment of his birthday until the end of the year of birth, can be negotiated from 4.000 € to 12.000 €. However, prices vary according to origin and ancestors’ origin, place of birth, etc. Sometimes a foal can negotiate on a higher basis, although it is particularly risky to invest heavily in a racehorse of which one knows almost nothing of its intrinsic qualities.
The Yearling is the horse born on January 1st or after January 1st until January 1st of the following year. Its value is determined by its pedigree, its athletic qualities, its precocity and the evaluation of its potential. The price range remains large, but on average Yearling is negotiated between 30,000 € and 100,000 €.
The pre-trained 2-year can also be sold on a wide range of prices, even larger than the yearling, knowing that prices can rise with certain thoroughbreds having already proved themselves. However, the investor has a better view on the qualities of his racing horse, his potential is precise, and the gains to come also.
The racehorse can be purchased during training, with the owner. For this type of mount, the minimum purchase price is already almost inaccessible for most investors.
The protrusion can also bring back enough to ensure a part of the maintenance of the racehorse. The breeding is negotiated from 300 € but can also reach exorbitant prices as soon as one considers horses having obtained good results in competition, a horse in good health can carry between 5 and 10 protrusions per month.
In order to determine the taxation on race winnings, it is necessary to define the degree of intervention of the owner
In order to be a non-intervening owner and to benefit from the exemption from race winnings, the owner entrusts the exploitation of his horse’s racing career to a professional, if this is not the case the owner is intervening and is taxed at BNC scheme, non-professional or professional with the possibility of deducting deficits. The capital gains are in turn after various allowances integrated into the income of the owner.
Race gains realized by the owner of a racehorse without ground or non-breeder who confers his horse to a coach without exercising any diligence in order to create a source of income do not constitute taxable products And are therefore exempt from income tax. Only profits or gains from the sale of horses are taxable, in this case, after tax reductions to the IRPP.
Race gains and gains realized by owners who do not fulfill the aforementioned exemption condition and the profits or gains realized by groundless breeders from the sale of their horses are taxable in the category of non-commercial profits .
Professionals: When the activity deployed by the owner is of a professional nature, the deficit is deducted from the profits of the same nature made during the tax year by the members of the tax household. In the absence of such profits, the deficit is chargeable to the total income under the conditions of ordinary law.
Non-professional: When the activity is not professional, the deficit is not deductible either from a professional profit or from the overall income. It can only be applied against profits from similar activities in the same or the following five years.
Established in 1962 by André Malraux, the Malraux Law allows to deduct tax on the amount of work realized in the context of a restoration of classified property. This system appeals to private investors to rehabilitate the “Patrimoine de France” that is french heritage.
Since January 1, 2013, the Malraux device has been targeting French resident taxpayers who invest in apartments to be renovated and intended for rental.
To benefit from Malraux device benefits, you must meet the following requirements:
The 2017 Malraux scheme gives the right to an income tax reduction calculated on the amount of restoration work undertaken by the taxpayer in the amount of:
– 30% for buildings located in a Remarkable ans approved Heritage Site PSMV (protection and development plan), QAD (old degraded districts) and NPNRU – Old safeguarded areas;
– 22% for buildings located in a remarkable heritage site with approved architectural and heritage valuation plan (PVAP) or whose restoration program has been declared to be of public utility. – Former ZPPAUP and AVAP.
The amount of work for the calculation of the tax reduction in Malraux 2017 law is retained within the annual limit of € 100,000.
When the property is held in undivided ownership, each undivided beneficiary shall benefit from the tax reduction calculated on the fraction of eligible expenses corresponding to his rights in undivided ownership.
Saved areas having “a historical, aesthetic or similar character to justify the preservation and enhancement of all or part of a group of buildings” and recognized as such by order of the prefect of the department.To benefit from the tax reduction, you must invest in an immovable located in a “remarkable heritage site”, that is to say:
Districts with a high concentration of degraded old housing, the list of which is to be fixed by decree, can also benefit from the tax reduction.
With a Malraux device, a lessor must annually inform the “Declaration No. 2042 Complementary”. In the first year, he must also enclose a letter of commitment.