[Updated 2025] Local Taxes in France for property buyers

Investing in real estate in France can be a lucrative opportunity, but it’s crucial to understand the local taxation landscape to ensure compliance and optimize your financial returns. Whether you’re a resident or a non-resident investor, familiarizing yourself with the different taxes associated with property ownership in France is essential. This article provides an in-depth overview of the key taxes you need to consider, focusing on local taxes in France to help you navigate the complexities of property investment effectively.

Understanding Property Acquisition Costs (Notary Fees)

When purchasing property in France, you will encounter various acquisition costs, often referred to as “notary fees.” These fees include not only the notary’s services but also a range of taxes and administrative costs. The specific amount you will pay varies depending on the type of property:

Older Properties: If you purchase an older property, expect to pay between 7% and 8% of the purchase price in acquisition costs. This total includes registration fees, land registration fees, and notary fees. Registration fees alone typically account for about 5.80% of the property’s price.
New Properties and Off-Plan Purchases (VEFA): For new constructions or properties purchased off-plan, the acquisition costs are generally lower, ranging from 2% to 3% of the purchase price. However, there is an additional 20% Value Added Tax (VAT) on the purchase price. The registration fees for these properties are around 0.7% of the purchase price.

It’s worth noting that while these fees are commonly referred to as “notary’s fees,” the actual notary’s fee (emoluments) makes up only about 1% of the total acquisition costs. The remainder is primarily made up of various taxes and administrative charges.

Tax on Rental Income: Obligations for Property Owners

Regardless of your tax residency status, earning rental income from property located in France requires you to declare this income and file a tax return in France. Here’s how rental income is categorized and taxed:

Unfurnished Rentals (Revenus Fonciers): If you rent out an unfurnished property, the income is classified as “revenus fonciers” (real estate income). This type of rental income is subject to French income tax and is calculated based on your total rental earnings minus allowable expenses, such as property repairs and maintenance.
Furnished Rentals (Bénéfices Industriels et Commerciaux – BIC): Income from renting out furnished properties falls under “Bénéfices Industriels et Commerciaux” (BIC) or commercial income. This category is treated differently from unfurnished rental income and may be eligible for specific tax regimes, such as the micro-BIC regime, which offers a flat-rate deduction.

For non-resident property owners, the minimum tax rate on rental income is 20%. Additionally, social charges, known as CSG (Contribution Sociale Généralisée) and CRDS (Contribution au Remboursement de la Dette Sociale), are levied at a rate of 17.2%. However, this rate is reduced to 7.5% for individuals who are affiliated with the social security system of another EU country, Switzerland, or the UK.

Local Taxes in France: Housing Tax and Property Tax

When you own property in France, you are liable for local taxes, which are a significant part of the taxation system. Understanding these taxes is crucial for managing your investment effectively.

Housing Tax (Taxe d’Habitation): The housing tax is a local tax that applies mainly to second homes. The tax is payable by the person occupying the property as of January 1st of the tax year, whether the owner or a tenant. The amount is calculated based on the property’s cadastral rental value, which is determined by local authorities, and is then multiplied by the tax rates set by the municipality. It’s important to note that primary residences are exempt from this tax as of 2023, making this tax mainly applicable to secondary residences or investment properties.
Property Tax (Taxe Foncière): The property tax is an annual tax imposed on the property owner, regardless of whether the property is occupied. Like the housing tax, it is based on the cadastral rental value of the property. The tax amount varies depending on the property’s location, size, and type. If you purchase a property during the year, the seller is generally responsible for paying the property tax for that year. However, it’s common for the buyer and seller to come to an agreement to share the tax based on the time each party owns the property during the year.

Understanding the impact of these local taxes on your investment is crucial, as they can significantly affect the overall cost of property ownership in France.

Real Estate Wealth Tax (Impôt sur la Fortune Immobilière - IFI)

For investors with substantial property holdings, the Real Estate Wealth Tax, or IFI, is another crucial tax consideration. This tax applies to real estate assets held in France by non-residents, subject to tax treaties between France and the investor’s home country.

Taxable Assets: The IFI is assessed annually on January 1st and includes a range of real estate assets such as primary residences, vacation homes, land, rental properties, shares in non-trading real estate companies (SCI), units in real estate investment funds (SCPI), and company shares if you hold at least 10% of the share capital.
Threshold and Rates: You are liable for the IFI if the net value of your real estate assets in France exceeds 1.3 million euros. The tax is calculated on a progressive scale, with rates ranging from 0.5% to 1.5%. Deductions are allowed for debts directly related to the taxable assets, provided they existed on January 1st of the tax year and are borne by the property owner.
Compliance and Penalties: The IFI is a self-assessed tax, meaning it is your responsibility to evaluate and declare your assets annually if they meet the criteria. Failure to do so can result in penalties, as the tax authorities can impose back taxes and fines for up to six years if they find that you were liable for the IFI but did not declare it. The IFI tax return is typically due at the end of May each year.

Strategies for Managing Local Taxes in France

Understanding and managing local taxes in France is essential for anyone investing in French real estate. Here are some strategies to optimize your tax position:

Seek Professional Advice: Taxation laws can be complex, and they frequently change. Consulting with a tax advisor who specializes in French real estate can help you understand your tax obligations and identify potential tax-saving opportunities.
Consider Tax Residency: Your tax residency status can significantly impact the taxes you pay on your French property. In some cases, establishing residency in France or another country with favorable tax treaties can help reduce your overall tax liability.
Use Tax-Efficient Structures: Investing through structures such as a Société Civile Immobilière (SCI) or a real estate investment fund (SCPI) may offer tax advantages. These structures can help manage inheritance tax issues and provide other tax benefits.
Stay Informed: Regularly review changes in French tax laws and regulations to ensure compliance and optimize your tax position. The French government periodically adjusts tax rates and rules, which can impact your property investment strategy.

Conclusion

Investing in property in France offers many opportunities, but it requires a solid understanding of local taxes to ensure compliance and maximize returns. By familiarizing yourself with acquisition costs, rental income tax, local taxes such as the housing and property tax, and the Real Estate Wealth Tax, you can better manage your investment and avoid potential legal and financial pitfalls.

To navigate the complexities of French real estate taxation with confidence, partnering with a knowledgeable and experienced accounting firm is essential. ESCEC International, your ultimate accounting firm in Paris, is here to provide expert guidance tailored to your needs. With a deep understanding of the French tax landscape and a commitment to excellence, ESCEC International offers comprehensive services that include tax planning, compliance, and advisory support for property investors. Whether you’re a resident or non-resident, our team is dedicated to helping you make the most of your investment in France while ensuring you meet all legal requirements.

Let ESCEC International be your trusted partner in achieving financial success with your property investments in France. Contact us today to learn how we can assist you with all your accounting and tax needs.