|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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This tax is an annual property ownership tax imposed on the owner, whether or not the property is actually occupied by them, or rented out.
The tax is levied for the year in which it is imposed and payable by the person(s) owning the property on 1st January of that year.
The tax goes towards the funding of local services by the commune, inter-communal and departmental councils. So all three councils impose an element of the tax and benefit from partial receipt of the revenues from it. Since 2011, the regions no longer participate in the tax.
The determination of the amount payable is made by the local councils, but the calculation and collection of the tax is carried out by the central government tax authority.
The basis on which the tax determined is similar to that of the tax d’habitation, although in a more straightforward manner.
Broadly speaking, the basis of the assessment is the notional rent that the property might be expected to achieve in the open market, having regard to the size condition and location of the property. This assessment is then discounted by 50% to take account of running costs eg repairs, insurance.
This notional rent may not bear any relation to any actual rent that may be being paid on the property as the notional rental values date from 1970.
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 percentage rate is then applied to this notional rent based on the income the authorities need to raise, called the taux d'imposition.
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 a second home the percentage rate is 1.2% for properties with a rateble value between €4,573 and €7,622 and 1.7% if they exceed this figure. For main homes the rate is 0.2% if the rateable value exceeds €4,573.
There is no automatic abatement of the tax for children, as is the case for the taxe d'habitation.
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. However, be careful how you interprete the net figure payable, as the gross amount may have been reduced due to the income or other circumstances of the current owner. If in doubt the Centre des Impôts Fonciers should be able to advise you of the gross amount, but the figure should also be on the tax demand.
Some local councils also make a separate charge for rubbish collection, in a tax called taxe d’enlèvement des ordures ménagères (TEOM), which is sent out with the taxe foncière. Where the tax is not levied, the costs of rubbish collection are funded from the general budget.
The level of the tax is generally higher in towns than in the countryside and also as between different regions of the country. The amount payable each year varies so much between local tax authorities and different properties that it would be pointless to state an average.
The tax demand is sent out during the third quarter of the year with a specified end date for payment, unless you elect to choose to pay on a monthly or annual basis by direct debit.
The tax demand is called avis d’imposition tax foncière. The detail of the calculation will show you how much of the tax goes to the various councils and who is making the largest increase!
The tax has wide application to all types of property whether residential, commercial, industrial or professional.
Land is also subject to the tax, though to a lesser extent, and there are also exemptions for buildings of an agricultural nature. There is also relief for the planting of new woodland.
In the event you sell a property during the year you are obliged to pay the tax for the full year, although it is not unusual for there to be an agreement with the new owner concerning sharing of the tax, which needs to be incorporated in the sale and purchase agreement.
If you carry out major improvements to the property then you are obliged to notify your local property tax office in order that there can be a revaluation of the property. Likewise with a new construction.
The relevant forms can usually be obtained from the local mairie or contact your tax office responsible for local property taxes, called the Centre des impôts fonciers within 90 days of practical completion. For new houses you should use Form H1, whilst for major improvements to an existing property you should use Form IL6704.
I. New Buildings
New buildings, additions to existing buildings, and rural conversions are granted full exemption from the tax for two years, provided the works are declared to the tax authority within 90 days of practical completion. Buildings of a non-domestic nature are only granted partial relief.
The relief of that part of the tax imposed by the commune is subject to no contrary decision by the commune or inter-communal body to impose the tax.
II. Energy Works
There is also partial (50%) or full exemption, for up to 5 years, for those new homes constructed to an energy efficiency standard that is higher than the regulations currently in force. This exemption is at the discretion of the local authorities. You would need to make enquiries at your local tax office.
Local authorities are also permitted to exempt from the tax those older homes that have had important energy conservation works carried out to them.
This exemption only applies to those dwellings built before 1989, and also on condition that the expenditure (excluding labour costs) in the previous year on such works exceeds €10,000, or €15,000 over the previous three years.
The exemption is at the rate of 50% to 100% for a period of up to five years.
Once again you would need to discuss with your local tax office.
You can read more about these tax exemptions and other forms of assistance for energy conservation works at Financial Assistance for Home Energy Conservation in France.
If you are a landlord and you are having difficulty in letting a property, or you are carrying out major works that makes it unsuitable for letting, then you can also obtain relief from payment of the tax.
The property must be incapable of occupation or otherwise vacant for at least three months despite your best efforts get it occupied. Proof of works, or attempts to let, must be supplied.
If the rent you are seeking is considered excessive you may not be granted relief
There is an exemption from the tax for certain persons, alhough they are not as wide as that of the local residence tax, the taxe d'habitation.
The following groups are granted relief from the tax:
If you are disabled but do not receive the AAH, then you should discuss your circumstances with your local tax office to establish whether you might be granted exemption. We have found the rules are not interpreted in a consistent manner.
Persons over 75 who qualify on income grounds may obtain exemption on a second home, although in all cases the relief is subject to the property being your principal residence.
In relation to the income tests, assessment to entitlement your your income is considered to be your revenu fiscal de référence as stated on your tax notice for the previous year. This figure is, of course, always lower than that of your actual gross income.
The applicable income limits for 2014 are 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 exoneration does not apply to that part of the tax related to rubbish collection.
There is also discretion to the local councils to grant relief on payment of the tax to others on a low income, but this is not widely adopted because of the importance of the tax to the operation of the councils. The reduction would in any event only be payable if the rateable value of your property was no greater than 130% of the average in the commune. You should check the tax demand you receive to see whether your council had adopted any of the discretionary exemptions.
Separately from the above reliefs, for low income households there is also a cap that has been set on the amount of the tax, which cannot be greater than 50% of net income. This cap is only available for the main home, to those who are not liable for wealth tax. We do not imagine there are many who are likely to benefit from this concession!
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