At Homes&Travel, we regularly get correspondence from readers keen to know where they stand in terms of tax when owning a home in France. Richard Way, editor of the Overseas Guides Company and an expert in the topic, has provided answers to two of the most frequently asked questions.
Question 1: How much should one allow for taxe d’habitation / foncière when buying a French property?
The two local taxes payable in relation to owning property in France are the taxe d’habitation and the taxe foncière. Just as in the UK, these do vary substantially, depending upon the region and also the size of the property. However as a broad rule of thumb, it can normally be anticipated that the two local taxes taken together would amount to something in the region of the likely amount of council tax in the UK for a similar location and style of property. Clearly this will vary but should nevertheless work as a good rough guide.
Long term lets
If the property is going to be rented out on a long term let then it would be the tenant of the property who would pay the taxe d’habitation each year. In most cases though, it will be for the owner to pay both taxes.
Taxes paid in different formats
The taxe d’habitation is payable in its entirety by the seller, without any reimbursement from the buyer. The apportionment normally commences on the date of completion and runs to 31st December in the year that the sale takes place, calculated on a daily rate. In general, the notaire will include this calculation in the final breakdown of the amount payable on completion.
Question 2: Will any UK property, pensions etc be taxed in France if a person takes out French residence?
It is imperative to establish whether a person is taking French residence when buying a house in France as this will indeed have substantial implications on the rest of their estate and their tax position. It is not always entirely clear where a person is resident as there are a number of factors that govern this, and the tests will be different from a UK perspective and from a French perspective. Thus each case will need to be considered on its own merits.
It is also important to note that pensions and investments will be treated differently for tax purposes between the two jurisdictions therefore the structures that may be efficient for UK inheritance tax purposes can be particularly disadvantageous in France. Questions of where pension funds should be drawn, for example, and then how they will be taxed do therefore become particularly important.
Things to consider before buying your French home
Thus there is a benefit in considering all of this in detail before the French property is bought. Circumstances do change, however, and these matters should be kept under constant review. These are issues that may require consideration not only by independent specialist solicitors with French and English law understanding, but also with investment advisors and possibly other professionals such as accountants. It is perfectly possible for them all to be working in tandem to ensure that the correct fiscal and legal situation is put in place.
Richard Way says, “While it is very easy to fall in love with a property in France, it is also important to fully understand the tax implications in order to make a decision based on knowledge.”
Richard Way, Editor, Overseas Guides Company (OGC)
Tel: +44 207 898 0549
Information on tax liabilities supplied by Matthew Cameron, Ashton KCJ www.ashtonkcj.co.uk an Associate of OGC
Tel: 01284 727016