|Finance & Taxation|
Personal Taxation in France1. Overview
2. Top Tips
3. Income Tax Liability
4. Income Tax Return
5. Calculating Income Tax Liability
6. Payment of Income Tax
7. Social Security Contributions
8. Taxation of Investment Income
9. Local Property Taxes
10. French Wealth Tax
11. Capital Gains Tax
12. Gifts Tax
13. Tax Inspection
14. Tax Complaints
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If you own a property in France, then the local property rates payable comprises two different taxes called the taxe d’habitation and the taxe foncière.
Local authorities also charge rates on business premises, called the Contribution Economique Territoriale (CET) . Even if you run the business from your from home you will still be liable for these rates, although there are certain exemptions and other concessions.
This is an annual residence tax imposed on the occupier of a property in which they were resident on 1st January of each year.
If the property is your second home, even though you may not physically be resident on 1st January, the tax is still payable, provided the property is capable of occupation.
Thus, the law assumes that if you have the right of occupation of the property and it is furnished and habitable, then the tax is payable. Liability to the tax has nothing to do with the amount of time you actually occupy the property.
Nevertheless, where you only use the property for a few weeks a year, and it is otherwise let out as a furnished letting, then you can be exempted from the tax, although you would then become liable for business rates.
If you let a property on an annual basis the tax is payable by the tenant.
Tenants of holiday lettings do not pay the tax, but any tenant occupying the property on 1st Jan on a permanent or even semi-permanent basis, is liable for the tax. The rule applies whether the property is furnished or unfurnished.
Landlords of French property can read more detailed information about local property taxes in our guide to Taxation of Rental Property in France.
The determination of the amount payable is made by the local council (commune), but the calculation and collection of the tax is carried out by the central government tax authority.
The formula for the calculation is ponderously complex but, broadly speaking, it is based on the notional rent that the property might be expected to achieve in the open market, having regard to the condition, size and location of the property.
This amount may not bear any relation to any actual rent that may be being paid on the property and, indeed, the notional rental values have not been updated since 1970, so are now desperately out of date!
The valeur locative brute of the property should be stated on the rear of the tax demand, and if you wish to query it you will need to visit your local Centre des Impôts Fonciers (Service de Cadastre), whose contact details are also given on the tax notice.
A formula is then applied to this notional rent based on the income the authorities need to raise to give a percentage rate of tax, the taux d'imposition
Accordingly, the amount of tax will vary dependant on the decisions of each commune and the size and condition of each property.
Where you have children, then relief of 10% to 15% for each dependant is granted, an allowance that is not means tested. This concession only applies if the property is your principal residence.
Local authorities also have discretion to grant a rebate up to 15% to those on modest incomes, provided the applicant meets the income limits above, and that the rateable value of their home is not greater than 130% of the average for the area. Once again, this only applies if the property is your principal residence.
In addition the rate of tax varies marginally according to whether the property is the main home or a second home, for in the case of the latter the rate for management costs is higher (3% rather than 1%).
Homes with a high rateable value also have an additional rate applied against them called prélèvements pour base élevée et sur les maison secondaires.
For main homes the rate is 0.2% if the rateable value exceeds €4,573.
For a second home the percentage rate is:
1.2% for properties with a rateble value between €4,573 and €7,622;
Those who are eligible for exemption or reduction in the tax are not liable for this additional rate, provided the property is their main home.
If you are buying a property, then the tax payable may be on the property particulars. If not, ask the seller or agent for a copy of the most recent tax demand, called avis d’imposition de taxe d'habitation. However, be careful how you interpret the net figure payable, as the gross amount may have been reduced due to the income or other circumstances of the current owner. You should check the rear of the tax notice to establish the gross figure before allègements, ie before any deduction.
If in doubt the Centre des Impôts Fonciers should be able to advise you of the gross amount, but the figure should be on the tax demand.
As might be expected the level of the tax is generally higher in towns than in rural areas. The amount payable varies so much between local tax authorities and different types of property that it would be meaningless to state an average.
If you move into the property mid-way through the year, then the former occupier is legally responsible for the tax for the whole of that year, subject to any private agreement that may be made.
If you carry out major works to your property you are required to advise the tax authority (Form IL 6704), who will then undertake a revaluation of the property. The revaluation will be necessary if the works increase by at least 10% the rateable value of the property.
By definition, the tax is not payable if the property is unoccupied.
However, the definition of 'occupation' used by the tax authority includes those properties capable of occupation. Ordinarily, this would imply that there would need to be furniture in the property, and that utility services were also available.
So properties in the course of renovation that you do not occupy, and which are not furnished, would be exempt from tax, as would a derelict property incapable of occupation. In order to obtain such an exemption the tax authorities normally require that you obtain a statement from the local council confirming the status of the property.
In certain towns and cities with a population over 50,000 the taxe sur les logements vacants (TLV) is payable on a property that has been empty for at least a year from the date of imposition of the tax on 1st January.
Other local authorities also have the discretionary power to levy a similar tax, although in their case, the property must empty for five consecutive years, commencing 1st January.
The level of the tax is calculated at the rate of 12.5% of the rateable value of the property, which increases to 25% from the second year.
However, the tax is not applied where the property is involuntarily vacant. These cases are:
If you are landlord of a property you have tried without success to let you will not be obliged to pay the tax. You will need to demonstrate evidence of your efforts to try and let the property, and to have done so at a local market rent.
The rule means that, in the above circumstances, you can claim exemption from the taxe d'habitation.
Local authorities have discretion to exempt chambres d'hôtes and classified gîtes located in rural development areas (Zones de Revitalisation Rurale (ZRR) from the tax, but only for that part let out for occupation by guests. You would need to approach your local mairie. You can also download the application form here.
Complete exoneration from the tax is available to certain groups of persons, provided the property is their principal home.
The exemption applies only if the property is your principal residence and you are not liable for French wealth tax.
There is no test of resources required for those in receipt of ASPA, ASI or RSA.
If you are disabled, but not in receipt of any of the above benefits you should consider making application for exemption. Provided you are able to demonstrate that you are incapable of employment then you may be able to obtain an exemption.
In the case of a married couple the age or disabled condition only needs to be met by one of the spouses, although if one of the spouses is working then exemption may not be granted.
The applicable income limits for the test of resources are based on your income for the previous year.
So for 2014 the means test is based on your net income for 2013 (revenu fiscal de reference), which cannot be greater than €10,663 for one person, a figure increased by €2,839 for each dependent 'half-part' in the household.
The following table shows the income limits per 'part' household. Beyond the first 'part' an additional adult counts as 1 part, and the first two children each .5 part. Third and fourth children count as 1 part.
Table: Income Thresholds 2014
|Household Size||Income Thresholds|
The exemption is also conditional upon you not living with someone (eg son/daughter) who has an income above the eligible threshold.
If you do not fall into one of the above groups, but your income is no higher than certain thresholds (which depend on family composition), then you receive a reduction in the amount of tax that you need to pay. This reduction, or relief, is called a dégrèvement or allégement.
Once again, if you pay l'impôt de solidarité sur la fortune (ISF) then you will not be entitled to this reduction.
The formula for calculating the reduction is complex but to benefit in 2014 your income for 2013 cannot exceed €25,005 per year for a single person, which increases for each additional member of the household - €5,842 for the first half-part and €4,598 for additional half-parts.
Broadly speaking, the tax authority will take your net income (revenu fiscal de référence) and then reduce this sum by an amount per 'household part', and the level of your taxe d'habitation is capped at 3.44% of this final reference figure, provided once again you are not liable for wealth tax.
Example: A couple with a net income of €15,000 and a local tax liability before reduction of €500. Their net income figure receives an abatement of €8,069 (for a couple), giving a figure of €6,931 as the basis for determining the tax payable. The tax payable would then be €6,931 x 3.44% = €238, giving a reduction of €262.
The tax demand is sent out towards the end of each year with a specified end date for payment, unless you elect to choose to pay on a monthly or annual basis by direct debit. You can also pay it via the internet, or by cheque.
Normally, the above reductions and exemptions are granted automatically by the tax authority on the basis of information obtained from you annual income tax return. So you do not need to apply to receive entitlement.
If you have not received a reduction or an exemption to which you think you are entitled, then you need to make a réclamation to your local tax office.
Those in receipt of Revenu de Solidarité Active (RSA) also normally receive complete exoneration from the both the taxe d'habitation and la redevance audiovisuelle.
If you think you may be entitled to tax relief, which has not already been accorded to you by the tax authority, then you should visit your local Centre d’impôts and discuss your circumstances with them.
If you also have a television then the TV licence, called the la redevance audiovisuelle, is also payable with the taxe d’habitation.
The annual cost of the TV licence is €133 (2014), which is subject to an annual index linked increase.
Only one TV licence is payable per household, irrespective of the number of televisions in a property, or the number of properties owned by the same household.
However, if you let out separate gîte accommodation, then the landlord is responsible for the payment of the TV licence. If you do not pay the tax d'habitation on the gîte, then you need to complete Form 3310A. You may be able to get some limited exemption if the gîte is only let out on a limited basis each year.
If you are granted complete exemption from payment of the taxe d'habitation, then this will also grant automatic exemption from payment of the TV licence.
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