Your Best 2025 to French Real Estate Taxes

Buying property in France is an attractive prospect for many international investors, thanks to its rich culture, beautiful landscapes, and promising real estate market. However, the French real estate tax system can be complex and, if not well understood, may lead to unexpected costs and compliance issues. Whether you are purchasing a charming Parisian apartment or a quaint countryside house, understanding the intricacies of French real estate taxes is essential. This comprehensive guide will walk you through the main taxes you need to consider when buying property in France, ensuring you are well-prepared for your investment journey.

Understanding Property Acquisition Costs in France

When purchasing property in France, buyers are required to pay acquisition costs, often referred to as “notary’s fees” (frais de notaire). Despite the common name, these costs include various fees and taxes, not just the notary’s service fees. Understanding these costs is crucial as they can significantly impact the overall price of your property purchase.

Notary’s Fees and Registration Taxes

The notary’s fees are generally around 7% to 8% of the purchase price for older properties, with the actual notary’s fee (emoluments) making up only about 1% of this total. The rest consists mainly of registration taxes and administrative fees. These costs include:

Registration Fees: For older properties, registration fees alone can account for about 5.80% of the property’s purchase price. These fees cover the cost of transferring ownership and registering the property in your name.
Notary Fees: Although commonly grouped with other acquisition costs, the actual fee for the notary’s services is relatively low, around 1% of the property’s price. Notaries are responsible for drafting the sales agreement, ensuring all legal obligations are met, and registering the transaction with the authorities.
Miscellaneous Fees: This includes various administrative costs associated with the property transaction, such as obtaining property surveys, title searches, and other essential documentation.

Costs for New Properties and Off-Plan Purchases

If you’re buying a new property or a property off-plan (VEFA – Vente en l’État Futur d’Achèvement), the acquisition costs are generally lower, ranging from 2% to 3% of the purchase price. However, these transactions are subject to Value Added Tax (VAT) at a rate of 20%. For new properties, the registration fees are typically around 0.7% of the purchase price.

This difference in cost is because new properties benefit from reduced registration fees, reflecting the government’s effort to encourage new property development and sales.

Tax on Rental Income from French Property

Investors planning to generate rental income from their French property need to be aware of the tax obligations associated with such income. French real estate taxes on rental income depend on whether the property is rented out furnished or unfurnished.

Taxation of Unfurnished Rental Properties

Income derived from renting out unfurnished properties is classified as “rental income” (revenus fonciers). This type of income is subject to progressive income tax rates in France. Non-residents earning rental income from French properties are required to file a French tax return, even if they are not domiciled in France for tax purposes.

Tax Rate: Non-residents are subject to a minimum tax rate of 20% on their rental income. This rate applies regardless of the total amount of income earned from the property.
Social Taxes: In addition to the income tax, social taxes (contribution sociale généralisée, or CSG, and contribution pour le remboursement de la dette sociale, or CRDS) apply at a rate of 17.2%. However, if you are affiliated with the social security system of another EU member state, Switzerland, or the UK, the social tax rate is reduced to 7.5%.

Taxation of Furnished Rental Properties

Income from furnished rental properties is categorized as “commercial income” (Bénéfices Industriels et Commerciaux, or BIC). This category allows for different tax treatment and deductions compared to unfurnished rental income.

Micro-BIC Regime: For annual rental income up to €77,700, the Micro-BIC regime applies, allowing a 50% automatic deduction on rental income to cover expenses. This simplified regime is popular among smaller landlords due to its ease of use.
Real Regime (Régime Réel): For rental income exceeding €77,700, or if the landlord chooses, the Real Regime applies. This regime allows landlords to deduct actual expenses, such as maintenance, repairs, mortgage interest, and property management fees, from their taxable rental income. This regime is beneficial for landlords with significant rental expenses.

French Real Estate Taxes

In addition to taxes on income, property owners in France are subject to local property taxes, which contribute to the maintenance and development of local infrastructure and services. The two primary local French real estate taxes are the Taxe d’Habitation and the Taxe Foncière.

Taxe d’Habitation (Housing Tax)

The Taxe d’Habitation was traditionally imposed on both primary and secondary residences. However, recent reforms have largely phased out this tax for primary residences, making it now primarily applicable to second homes and vacant properties.

Second Homes: Owners of second homes are liable for Taxe d’Habitation, calculated based on the property’s rental value and the tax rate set by local municipalities. The tax amount varies significantly depending on the property’s location and size.
Tax Exemptions: Some exemptions and reductions are available, particularly for low-income households and individuals with disabilities. It’s essential to check with local tax authorities to determine eligibility for these exemptions.

Taxe Foncière (Property Tax)

The Taxe Foncière is an annual tax imposed on property owners, regardless of whether they occupy the property. It is one of the essential French real estate taxes and contributes to local budgets.

Tax Calculation: The Taxe Foncière is calculated based on the cadastral rental value of the property, which represents the estimated annual rent that could be generated by the property. Local authorities set the tax rate, and the amount varies across regions.

Liability: If you purchase a property partway through the year, the seller typically pays the Taxe Foncière for the current year. However, it is common practice for buyers and sellers to agree on prorating the tax for the portion of the year each party owns the property.

Real Estate Wealth Tax (IFI)

High-net-worth individuals owning substantial real estate assets in France must be aware of the Impôt sur la Fortune Immobilière (IFI), or real estate wealth tax. This tax applies to French and foreign property owners whose real estate assets exceed a net value of €1.3 million.

What is IFI?

The IFI is a tax on the total net value of real estate assets held as of January 1st each year. It includes:

Primary and Secondary Residences: All residential properties owned by the taxpayer, including main residences, vacation homes, and investment properties.
Land and Rental Properties: Land plots and rental properties are also included in the calculation of taxable assets.
Shares in Property Companies: Ownership of shares in property companies (SCI) and real estate funds (SCPI) is considered part of the taxable estate if the investor owns a significant share.

Calculation and Payment of IFI

Net Asset Calculation: The IFI is calculated on the net value of the property assets, meaning any outstanding mortgages or debts related to the properties can be deducted.
Tax Rates: The tax rate is progressive, ranging from 0.5% to 1.5%, depending on the total value of the property assets. The more valuable the property holdings, the higher the tax rate applied.
Declaration and Payment: IFI is a declaratory tax, and property owners are responsible for determining their liability and declaring their assets each year. The tax return is typically due at the end of May. If the tax authorities find undeclared assets, they may impose penalties and recover unpaid taxes for up to six years.

Capital Gains Tax on Property Sales

Selling a property in France may also subject you to capital gains tax, depending on how long you have owned the property and whether it is your primary residence.

Primary Residence Exemption: If the property being sold is your primary residence, capital gains tax is typically not applicable, offering a significant advantage for homeowners.
Secondary Properties and Investment Properties: For other properties, capital gains tax is calculated based on the difference between the sale price and the original purchase price, with deductions allowed for certain expenses, such as renovation costs.
Tax Rates: Capital gains tax rates vary, with a base rate of 19% for non-residents, plus social charges. There are reductions available based on the duration of property ownership, with full exemption after 30 years.

Conclusion: Understanding French Real Estate Taxes

Navigating French real estate taxes is essential for anyone looking to invest in property in France. From acquisition costs to local taxes and wealth tax obligations, understanding these taxes will help you make informed decisions and optimize your investment.

Contact ESCEC International – Your Trusted Partner in Navigating French Real Estate Taxes

Managing French real estate taxes can be challenging, but you don’t have to do it alone. ESCEC International, your trusted accounting firm in Paris, offers expert guidance and tailored solutions to help you manage your real estate investments efficiently. Contact us today to learn more about how we can assist you with French real estate taxes and ensure your investment is compliant and optimized.