At Bluesky France Finance, we recognize the intricacies that high-net-worth (HNW) expatriates encounter when dealing with the French tax system, particularly concerning property ownership. This guide is designed to elucidate the French property tax regime for our esteemed expatriate clientele.

Taxe Foncière – The Bedrock of Property Taxation

As a property owner in France, taxe foncière is the foundational tax, assessed annually on properties you own. It is important to note that non-residents are not exempt from this tax, which is based on the cadastral rental value—a theoretical rental income—of the property. The final amount is the product of this value and the rates determined by local authorities. Payment of this tax is typically due in the last quarter of the year and can be settled either in one lump sum or through installments via direct debit. For secondary homes, the rate can be higher, around 3%, reflecting a policy aimed at encouraging the availability of housing for full-time residents​¹​.

Taxe d’Habitation – The Evolving Residence Tax

For those with a secondary residence in France, the taxe d’habitation remains a relevant expense. This tax applies to furnished homes that are not the taxpayer’s primary residence, including those owned by corporations, associations, and non-commercial state entities. The tax is based on the property’s rental value and varies according to location and size. It’s noteworthy that as of January 1, 2023, the taxe d’habitation has been abolished for primary residences, but it persists for secondary homes and vacant properties​²​.

IFI – Wealth Tax on Real Estate

The IFI, or real estate wealth tax, targets the real estate holdings of HNW individuals when the total value exceeds €1.3 million. This tax is pertinent only to your French real estate assets, a crucial distinction for non-residents. The rates range from 0.5% for real estate values just above €800,000 to 1.5% for those exceeding €10 million. For non-residents, this tax is limited to French-situated real estate, a significant factor when considering your global tax exposure​³​.

VAT Reclaim on New Builds

Significantly, non-resident individuals and foreign entities that incur VAT for business expenses related to new constructions in France may be eligible for a refund. This process is subject to specific conditions, such as the submission of electronic claims and adherence to stipulated minimums and deadlines. For EU-based entities, the claim must be filed electronically via the tax system of the home member state, while entities outside the EU file through the French tax authority’s online platform. The invoices submitted must meet detailed requirements, including a unique sequential number, comprehensive identification details, and a clear breakdown of the goods or services provided, along with the applicable VAT rate​⁴​.

To successfully navigate these taxes, expatriates investing in French property should engage in proactive planning and seek expert tax advice. Understanding the nuances of the French tax system can lead to significant financial benefits and ensure compliance with local legislation.

In conclusion, whether your interests lie in the lavender fields of Provence or the historic boulevards of Paris, a thorough understanding of France’s tax environment is vital. At Bluesky France Finance, we are dedicated to providing our expatriate clients with bespoke mortgage solutions that align with their unique tax considerations. We encourage you to reach out to our specialists for tailored advice and assistance.

Please Note: This article is for informational purposes only and does not constitute legal or financial advice. Always consult with a qualified professional when making decisions related to your personal finances or legal obligations.