What are the tax implications of property?

Whenever you buy or sell property, there are taxes to pay.

• Property purchase: VAT

When you buy property, you pay tax that is included in the overall purchase price: VAT (Value Added Tax). VAT is charged at 19.6% of the purchase price. But for certain new-build homes, the VAT rate is reduced to 5.5%.

When you buy property, you will also have to pay the purchase-related or notary's expenses, which are not included in the purchase price. These comprise:

• the notary's fee
• the notary’s disbursements
• the taxes payable to the government every time a property changes hands

The registration fees (equivalent to stamp duty) are lower for purchases of new-build property (approximately 3% of the purchase price) than for pre-owned property (7-8%).

Don't forget When you move into your new home, don't forget to inform your tax office of your new address and the fact that you are now a homeowner.

• Property sale: capital gains tax

If the property you are selling is your principal residence or has been owned by you for more than 15 years, you will not have to pay any property-related capital gains tax on the difference between the price you bought at and the price you sold at.

In all other cases, the capital gain made is subject to tax at 31.3% (2011 figure).

Capital gains tax is calculated on the basis of:

• the property purchase price and purchase-related expenses
• any work carried out on the property that has contributed to increasing its value

on the basis of legislation current at 23 May 2011.

• Occupancy tax (taxe d’habitation)

This is payable on every home occupied on 1 January of every tax year, regardless of whether you are the property owner or tenant.
If you buy a property and live in it, you would therefore be liable to pay this occupancy tax. But if you decide to rent it out, then your tenant will be liable to pay the occupancy tax on this property.

The amount of tax payable is calculated on the basis of the rental value of your property, which involves taking account of many different criteria, including floor area, location, etc.

Please note: there are some exemptions from occupancy tax, which include certain types of disability and tenants of university halls of residence managed by the CROUS for the region concerned.


For more information…
View the Taxe d’habitation article at www.service-public.fr (in french only)

• Property tax (taxe foncière)

This tax is payable by property owners on all properties in their ownership on 1 January of every tax year. It is therefore charged to the owner, even where the property concerned is rented out.
Owners of new-build property are exempt from this tax for the first 2 years of ownership.*


For more information…
View the Taxe foncière sur les propriétés bâties article at www.service-public.fr (in french only)

Local tax reductions introduced in 2011 The income-related conditions required to qualify for local tax reductions or exemptions in general, and property and occupancy taxes in particular, were published in the Journal officiel of Saturday 26 March 2011. (in french only)

* Under the terms of Article 1383-I of the French General Tax Code