It is true that there is a France that is suitable for everyone; yet, regardless of which it is, life is more laid back. Despite the fact that it is simple to be by oneself in the picturesque countryside, there is no feeling of isolation because to the efficient flow of autoroutes and the great aviation links. Please have a look at the following brief information, which will provide you with an overview of the process of purchasing or selling a home in France.
Seven Steps to the Purchasing Process For International Buyers
- Offer to Purchase:
The first kind of offer to purchase is a legally binding offer that is written down and includes the conditions, the price, and the amount of time that the offer is valid for.
- The Selection of a Notary “Notaire”:
After the offer has been accepted by the seller, the parties will designate a French notary to handle the legal documentation. This may be done by a single notary or by assigning one notary to each stage of the transaction.
- Technical Surveys and Certificates:
These papers are required to be supplied prior to the proceeding to Step 4. The energy performance evaluation and the carbon dioxide report, in particular, are required to be accessible prior to the marketing of the home. This is an essential point to understand.
- The “Compromise de Vente” (also known as the “Promesse de Vente”) and the payment of the deposit:
The deposit, which is normally between five and ten percent of the total purchase price, is deposited into the escrow account of the notary public. This account is protected by an unlimited guarantee and is guaranteed by the French government. A ‘cooling-off’ period of ten days is triggered by the compromis, which is the preliminary purchase contract. During this time, the buyer has the right to withdraw from the transaction for any reason and get a full return of their deposit funds. Following the expiration of this time, the buyer’s right to cancel the contract is contingent upon the conditions that were agreed upon by the parties in the preliminary contract (for example, the acquisition of a mortgage).
- Research on the Land Registry Conducted by the Notary:
The objective of these searches is to verify title of the property, in addition to identifying any urban or environmental restrictions that actually impact the land (or may affect it in the future), such as rights of way.
- Completion:
Upon completion, the notary public’s office is the location where the signature is taken (although the buyer may execute the document via a power of attorney). At this stage, the remaining balance of the purchase price, the registration duties, and the fees for the notary and the real estate agent must be paid by transfer prior to the conclusion of the transaction.
- Registration:
The notary public is responsible for registering the deed with the French Land Registry system.
Taxes in France as a Property Investor
Navigating the French tax landscape can be complex, especially for non-residents. This guide provides essential insights into the taxes you may encounter when purchasing and owning property in France.
1. Property Transfer Tax (TFV)
When purchasing a property in France, you’ll typically pay a property transfer tax (TFV). The rate varies depending on the property’s value and location. In general, the TFV ranges from 5.8% to 7.8% of the property’s sale price.
2. Wealth Tax (ISF)
If your worldwide net wealth exceeds a certain threshold (currently €1.3 million in 2024), you may be subject to the wealth tax (ISF). This tax is levied on the value of your assets, including French real estate. The ISF rates are progressive, with higher rates applied to larger net worths.
3. Income Tax
As a non-resident, you’re generally not subject to French income tax on rental income from your French property. However, if you become a French tax resident (spending more than 183 days in France per year), you’ll be liable for income tax on your rental income.
4. Local Taxes
In addition to national taxes, you may also be subject to local taxes, such as property tax (taxe foncière) and dwelling tax (taxe d’habitation). These taxes are based on the property’s value and location.
5. Capital Gains Tax (CGT)
If you sell your French property, you may be subject to capital gains tax. The rate varies depending on your holding period and other factors. If you’ve owned the property for more than five years, you may benefit from a preferential tax rate.
6. Social Security Contributions
As a non-resident, you’re generally not required to pay French social security contributions on rental income. However, if you become a French tax resident, you’ll be subject to these contributions.
7. Double Taxation Agreements
France has double taxation agreements with many countries, including the UK, the US, and Germany. These agreements can help reduce or eliminate double taxation on your income and capital gains.
Key Considerations for Foreign Investors
- Tax Residency: Determine your tax residency status to understand your tax obligations in France.
- Professional Advice: Consult with a tax advisor specializing in French property taxation to get personalized guidance.
- Estate Planning: Consider estate planning implications, especially if you plan to leave the property to your heirs.
- Currency Exchange: Be aware of currency exchange fluctuations and potential costs associated with converting funds.
Navigating the French property tax landscape as a foreign property investor requires careful planning and professional advice. By understanding the key taxes and regulations, you can make informed decisions and minimize your tax liabilities. Consulting with a tax advisor specializing in French property taxation can provide valuable guidance and ensure compliance with local laws.
