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Local taxes relating to your French property

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As the saying goes, timing is everything. In terms of property transactions, it can have financial implications. If you own a French property, completing its sale at the right time can save you money.

The main reason for this is the French tax system. There are two types of local taxes to pay when you have a French property:

The taxe foncière (land tax) is an annual property ownership tax payable by the owner, regardless of whether the property is occupied by them or rented out (although new builds may be exempt from this tax for the first two years after construction).

When a property is sold, payment of this tax will be due by the buyer and the seller on a pro rata basis, in proportion to their respective periods of ownership of the property within the calendar year. In practice, the seller will receive the land tax bill in their name in September or October. If the sale completes after that time, the buyer will reimburse them for their share based on that tax bill. However, if the sale completes before then, the reimbursement will be based on the previous year’s tax bill, and so is likely be lower because, since 2011, this tax has increased by a national average of 15%. 

It is important to note that the French tax year is aligned with the calendar year (1st January - 31st December).

The taxe d’habitation, a residence occupancy tax similar to UK council tax, is payable annually by the occupier of a property in which they were resident on 1st January of the year in question. If the sale of your property is due to complete around the end of the year, it is beneficial for it to take place before 31st December so that you do not have to pay the following year’s occupancy tax. However, if you are buying a property, it is preferable to delay completion until after 1st January for the same reason. 

The occupancy tax is not due if the property was empty (of occupants and furniture) on 1st January. To prove this, it is advisable to take photos and cancel the utility bills for the property.

The occupancy tax has recently been restructured, with a view to being completely abolished at a future point. Depending on your situation, you could see a reduction in the amount due of 30% in 2018, 65% in 2019, and working towards a 100% reduction in 2020. 

The French tax authorities will be informed about the change of ownership of the property once the title deed has been registered at the Land Registry. Therefore, you should receive future tax invoices at your home address specified in the title deed. The tax authorities will then ask you for your bank account details and give you the option of paying by monthly direct debit if you prefer.

This article is for general information only and does not constitute investment advice. French law is a highly specialised area and you should only act or refrain from acting after receiving full professional advice on the facts of your particular case. Always consult an IFA.