Repatriation to France: Financial Aspects of Property Purchase for French Expats

For French expatriates considering a return to their homeland, purchasing property in France involves navigating a complex financial landscape. This guide highlights the key financial intricacies, particularly focusing on the impatriate régime, to assist French expats in making informed property investment decisions upon their repatriation.

1. Tax Residency Considerations:

A primary factor for French expats returning home is determining their tax residency status. Becoming a tax resident in France generally occurs if you plan to use the property as your principal residence or if you meet certain criteria such as spending more than 183 days per year in France, basing your primary occupation in France, or having the majority of your income or assets in France. As a tax resident, you are liable for taxation on worldwide income, property, and capital gains. Conversely, non-residents are only taxed on French property​​.

2. Implications of Wealth Tax:

French residents are subject to wealth tax on their household’s worldwide real estate assets if the total value exceeds €1.3 million. There is a €800,000 tax-free allowance, with tax rates ranging from 0.5% to 1.5%. This includes all types of real estate properties, although the value of a main home can be reduced by 30% for wealth tax purposes.

3. French Succession Tax and Forced Heirship:

French inheritance tax varies based on the beneficiary’s relationship to the deceased. Children are taxed starting at 5%, with significant allowances. Spouses are exempt from inheritance tax on assets passed from the first spouse. Other family members are taxed between 35%-55%, while non-relatives face a 60% tax rate with minimal allowances​​.

4.  Local Property Taxes:

Regardless of tax residency, property owners in France are liable for local taxes. The Taxe d’habitation, based on notional rental value, is being phased out for main residences as of 2023. The Taxe foncière, also based on notional rental value, is paid by the property owner.

Repatriating to France and investing in property requires careful financial planning, particularly regarding tax implications under the impatriate régime. Understanding the nuances of tax residency, wealth tax, inheritance tax, and local property taxes is crucial. French expats are advised to consult with financial and legal experts to ensure compliance and optimize their investment in French real estate.