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Rental Property and Local Rates Exemption

Monday 05 September 2016

A property destined for letting that has never actually been let can be granted exemption from the taxe foncière, a French court has ruled.

As regular readers will know, property owners in France are subject to two local rates (or taxes), the taxe d’habitation and the taxe foncière.

In the case of a rental property, unless a holiday letting, the former is paid by the tenant, whilst the landlord remains liable for the ownership tax, the taxe foncière.

However, where the landlord has been unable to let the property the law also provides that they can obtain exemption from this tax.

In order to trigger this entitlement three conditions are necessary:

  • That the property is vacant through no fault of the landlord;
  • That the property has been vacant for at least three months;
  • That the whole of the property has been vacant for at least this period.

The landlord is obliged to provide satisfactory evidence to the tax office that that they have tried unsuccessfully to let it and to have attempted to do so on terms in line with the local market.

In a case recently considered by the Conseil d'État, the supreme administrative court in France, a landlord sought exemption from the taxe foncière even though the property had never been let.

Their local tax office, and subsequently the local tribunal, had refused their application on the grounds that the property could not be deemed to be normally used for letting ("normalement destinée à la location") as required by Article 1389 of the code général des impôts.

The Conseil d'État ruled that simply because the property had never been let did not mean that it was not normally used for letting purposes. No such prior condition was required in the tax code.

Accordingly, the judgement of the lower court was overturned and the landlord granted exemption from the taxe foncière for the years 2010 and 2011.

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