French Property Law
Promesse de vente - (French Property Sale contract)
French Property Law: Costs and Taxes
The costs and taxes that have to be accounted for have been broken down here into Transfer Costs and Taxes, Property & Occupation Taxes and, for properties exceeding currently €720,000, Wealth Tax.
The transfer of real estate in France is subject to taxation, as is the case in most developed legal systems. With exception to property under 5 years old, the purchaser should allow for 6.5% to 7.5% of the property purchase price as payment in taxes and costs. Although in certain circumstances the payee can be negotiated, it is currently the market position that the purchaser foots this expenditure.
This percentage includes the following costs and taxes (percentage based on the property purchase price):
between vendor and purchaser pro-rata for the period of the year that the vendor/purchaser own the property. It should be noted that the “taxe foncière” payment is seldom provided for in the notaire’s completion note and payment should be made separately through the notaire. The payment is often dealt with directly between the parties upon completion of the purchase.
Residential property is subject to two annual taxes: Property Tax ("taxe foncière"), (also due in commercial property), charged to the owner of the property as at 1 January of the year in question and occupation tax ("taxe d'habitation") payable by the occupier of the property as at the same date.
In principle, new properties are exempt from property tax ("taxe foncière") for the first two years following construction completion.
For the year of purchase, the "taxe d'habitation" remains payable by the vendor, whereas it is custom for the "taxe foncière" to be shared proportionately between vendor and purchaser pro-rata for the period of the year that the vendor/purchaser own the property. It should be noted that the “taxe foncière” payment is seldom provided for in the notaire’s completion note and payment should be made separately through the notaire. The payment is often dealt with directly between the parties upon completion of the purchase
Unless there are alternative provisions in Double Tax Treaties, individuals are subject to wealth tax ("impôt de solidarité sur la fortune") when the net value of their taxable estate exceeds €720,000 (figure as at 1 January 2002). Although companies are not liable for wealth tax, company shares are taxable assets in the hands the shareholders. Individuals who are domiciled for tax purposes outside France are only chargeable to wealth tax on their property situated in France.
The base of wealth tax is calculated on the true market value of the asset at 1 January of the year in question less the value of any secured debts. The tax levied progressively over the exoneration threshold value. The applicable rates are set out below as follows:
- estate up to € 720,000 0 % - between € 720,000 and € 1,160,000 0.55 % - between € 1,160,000 and € 2,300,000 0.75 % - between € 2,300,000 and € 3,600,000 1.00 % - between € 3,600,000 and € 6,900,000 1.30 % - between € 6,900,000 and € 15,000,000 1.65 % - over € 15,000,000 1.80%