The French government, not to be beaten by the UK on eventful budget announcements, has confirmed earlier this week that the finance law for 2025 will include an option for each French département (county) to put up the departmental tax on purchases by 0.5%. The departmental tax is one of the several taxes that are included in the French purchase fees, colloquially referred to as Notaire’s fees, but formally called “droits de mutations à titre onéreux” (DMTOs).
If the finance law for 2025 goes through on this specific point, it is expected that for any county deciding to exercise this option the change will come in force from 1st June 2025 and will apply to any purchase completing after this date, regardless of when the preliminary contract was signed. If the election is made, the higher rate is supposed to be temporary and revert back to the previous rate after a period of three years, but many commentators have made the point that this was the case for the last DMTOs hike in 2014, which ended up being permanent.
At present, we advise our clients purchasing in France to expect to pay around 7-8% of the sale price towards the DMTOs, which are due in addition and represent a significant expense to budget for. With this change, our recommendation would be instead to budget closer to 9% of the sale price. This will be particularly troublesome for British buyers signing preliminary contracts early Spring 2025 (prime purchasing season), as the potential change will need to be factored in both in terms of their budget and financing, but also in terms of currency exchange, and we certainly expect that many completion deadlines will be set to 31st May, with potential disputes over avoidable delays resulting in the new DMTOs rate applying to the transaction.
There have already been many versions of the finance law for 2025 so the above is not yet set in stone, however the government seems particularly keen on this new measure to prop up counties clamouring for additional public funds. At least, unlike the English SDLT changes from last month, there will be more than a day’s notice to prepare for this change! To be noted that the change will not apply to new builds, which remain subject to VAT rather than DMTOs.
