French Property Taxes
Category: Top Tips > Buyer's Guide | 27th Aug, 2018
As the long and sunny summer holiday draws to an end, we turn our attention to September. For French property owners, this is the month for the annual property tax demands, namely Taxe d’Habitation and Taxe Fonciere. We take a closer look…
French Property Taxes, In A Nutshell:
Taxe Foncière is a land tax. The owner of a property pays it even if there are no buildings on the land.
Taxe d'Habitation is a residence tax, similar to UK Council tax. It is paid by the household living in the property on 1st January, whether it is an owner, tenant, or by the owner if vacant. If the property is used for short-term or holiday lets, the owner normally pays the bill. The taxe d’habitation demand also includes the annual TV licence payable.
Both Taxe Foncière and Taxe d'Habitation are payable by non-residents and French residents. The tax is often higher on second homes due to possible discounts available on one's main residence.
When are the Taxes DUE?
Demands for both Taxes go out in September. They must be paid by a specified date, usually in October (Taxe foncière) and November (Taxe d'habitation) but this varies from place to place. Failure to pay on time incurs a 10% penalty.
TAXE FONCIERE: THE LONG STORY...
Taxe Foncière is a land tax paid by the owner of the property, irrespective of who actually lives there. The tax is divided into two parts:
· the tax on buildings (taxe foncière sur les propriétés bâties)
· the tax on land (taxe foncière sur les propriétés non bâties)
The tax on buildings is paid on any habitable property, whether or not it is occupied. It is levied locally. The tax on land is levied nationally. If you sell a property partway through the tax year Taxe Foncière is apportioned by the notary during the sale.
How is Taxe Foncière CALCULATED?
Taxe Foncière is calculated in a similar way to Taxe d’Habitation and is based on the notional rent that the property might achieve in the open market accounting for the size, condition and location of the property. This amount is then discounted by 50% to allow for running costs, repairs, insurance and so on. This notional rent may not bear any relation to any actual rent being paid for the property as notional rental values date back to 1970. A percentage is then applied to this notional rent based on the income the authorities need to raise, called the Taxe d’Imposition. The tax rate varies marginally depending on whether the property is a main home or a second home.
Taxe Foncière - EXEMPTIONS
Exemptions are available, for a main home, if the occupant is:
· aged 75 or over on 1st January of the relevant year
· if the taxpayer is aged between 65 and 75 on 1st January of the relevant year and their taxable income falls below a certain level
· the occupant receives certain disability or old age allowances on 1st January of the relevant year
· Land used for certain purposes such as farming
Exemptions and RELIEFS are also available on:
· New builds (that are used as a main residence) are exempt for the first two years after construction (a special Tax Form (H1 or IL) must be filed with the local tax authorities within 90 days of completion of the property*).
· Renovated properties can benefit from exemptions if reconstruction or additional construction work has been carried out. This is determined by the nature and size of the work (a special Tax Form (H1 or IL) must be filed with the local tax authorities within 90 days of completion of the renovation works).
· There is also partial (50%) or full exemption, for up to 5 years, for new homes constructed to an energy efficiency standard higher than current regulations (this exemption is at the discretion of the local authorities).
· Older homes that have had important energy conservation works carried out may also be exempt at the discretion of the local authority.
TAXE D'HABITATION: THE LONG STORY...
Taxe d'Habitation is a residence tax. Taxe d'Habitation is paid by the household living in the property on 1st January, whether it is an owner or tenant, or by the owner if vacant or used for short-term (holiday) lets.
Taxe d'Habitation is determined by local and county councils and it is spent on community services such as street lighting, cleaning and local schools. Taxe d'Habitation also applies to mobile homes and caravans if they are the taxpayer's main residence.
In 2017, the French Government made several reforms to Taxe d’Habitation with the aim of making 80% of habitants exempt from the Taxe by 2020. The reforms do not apply to second homes and mainly apply to those receiving state benefits.
Earlier this year the Government published a report stating that Taxe d’Habitation would be fully abolished by 2021, although it is anticipated that other Taxes will be introduced.
· Taxe d'Habitation includes the TV licence fee so if you don't have a TV it can be deducted from your bill.
· It may include a portion for refuse collection ”ordures” (if not, a separate bill will be issued for this). In some parts of France refuse collection can take place as often as 3 times a week so if a property is your second home you may apply for a reduction on this.
· People aged over 60 or widows/widowers (no age restriction) who occupy the property as their main residence on 1st January and whose net taxable income is below a certain amount can apply for a deduction or exemption.
· There are some deductions available for owner-occupiers on low incomes or with dependents.
How is Taxe d'Habitation CALCULATED?
The tax is based on a notional rental value for the property multiplied by the tax rate fixed locally. It is calculated on the living area of a property, including outbuildings, garages and amenities, and factors in the quality of construction, location, renovations, services (e.g. mains water, electricity and gas) and amenities such as central heating, swimming pool, covered terrace and garage. Properties are placed in eight categories ranging from "very poor" to "luxurious". Changes made to a building, such as improvements or enlargements, must be notified to the land registry within 90 days to ensure they are put into the correct category, which is why it is important to send them notification of any improvements or changes to the property within 90 days.
How is Taxe d'Habitation & Taxe Foncière calculated if you BUY OR SELL French Property?
Taxe d'Habitation - in the year you buy a property, the seller will be responsible for paying Taxe d'Habitation as it is payable by whoever is occupying the property on 1st January of the relevant year. Even if you become the owner on 2nd January, this tax will still be the seller’s responsibility.
Taxe Foncière - this is usually apportioned between the seller and the buyer according to how long they own the property in the relevant year.
* A building is considered complete when it can be used for its intended use even when there may still be some work to do, such as decoration. External rendering must be complete and safety features in place, such as balustrades (which is why some new properties are left unrendered for a very long time!).
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