French Property Taxation

When buying property in France, there are several purchase-related taxes and charges. These include transfer taxes (“droits de mutation” / “stamp duty”), notary fees (which include registration and administrative duties), VAT (on new builds or off-plan properties under certain conditions), and local registration or departmental charges depending on the location.

Once you own a property, you’ll face ongoing property taxes. The main ones are taxe foncière (a land/property ownership tax) and taxe d’habitation (a residence tax only on secondary residences). There may also be taxes on income if you rent out, wealth tax (if your property assets exceed certain thresholds), and capital gains tax when you sell (if conditions are met).

Taxe foncière is an annual tax paid by property owners. It applies to all property owners regardless of whether the property is their main residence or a secondary home. The amount depends on the “valeur locative cadastrale” (assessed rental value), the size and type of property, and local rates set by the commune and other local authorities.

Taxe d’habitation used to be a tax levied annually on the occupant of a habitable residence (owner-occupant or tenant) based on the same kind of assessed rental value basis.

However, as of 1 January 2023, taxe d’habitation has been abolished for primary residences. It still applies in many cases for secondary residences (holiday homes etc.), or other special cases.

VAT at 20% applies to new builds or off-plan properties sold by developers, and this is built into the purchase price.

Once you have completed the purchase, you are able to reclaim the VAT by agreeing to a professional rental management package.

Conditions to qualify:

1. Property must be VAT-liable on purchase, typically this means it is:

   • A new build (or building completed less than five years ago) sold by a VAT-registered developer.
   • Or offered off-plan (“VEFA”-style) by a company subject to VAT.
   • If the sale is by a private individual who isn’t VAT-registered, then the sale may be exempt, and the VAT cannot be reclaimed.

2. You commit to operating a commercial rental activity (“para-hôtellerie”), which is what unlocks the VAT reclaim. Key elements include:

   • The property must be furnished.
   • Short-term furnished rental (holiday let or tourist rental) rather than simply long-term residential.
   • The rental must offer at least three of the following services: reception/guest check-in, cleaning during stay, linen/towel provision or change, breakfast (or equivalent service) for guests.
   • You typically sign a management/lease contract with a professional rental operator who handles the services.

3. Long-term rental commitment (usually 20 years). If you stop the rental activity early, you may have to repay part of the VAT.

   • If you stop after 10 years instead of 20, you may repay some of the benefit.
   • If you sell the property: if the new owner continues the rental activity under the same terms, no repayment; if not, you may owe part of the refund.

4. Timing and payment particulars:

   • If buying a completed building, you pay full price including VAT, then apply for the refund afterwards (often 3-6 months later).
   • If off-plan, you may pay in staged payments (each including VAT) and claim a refund accordingly, or sometimes the purchase price is quoted net of VAT.

The ability to reclaim VAT on a new build apartment or chalet in France is one of the key attractions for investors. By saving 20% from the asking price the potential yield / ROI is significantly higher.

There are reduced VAT rates (e.g. 5.5%) under specific conditions in certain zones (urban renewal zones, priority districts) or for certain social housing etc.

France has a real estate wealth tax known as IFI (Impôt sur la Fortune Immobilière). If your property assets (directly or indirectly) are located in France exceed a certain threshold, you may have to pay this tax. Main residences can get a partial allowance (often reducing the taxable base by 30%). The rate is progressive: it starts low for just above the threshold and increases for very large property holdings.

The key threshold details for the Impôt sur la Fortune Immobilière (IFI) in France:

• You become liable for IFI if the net value of your taxable real estate assets (after allowable deductions) exceeds €1,300,000 as at 1 January of the tax year.
• Although the threshold is €1.3 million, the tax calculation starts on the portion of net assets above €800,000.

The progressive tax rates for 2025 are:

• Up to €800,000 → 0%
• €800,001–€1,300,000 → 0.50%
• €1,300,001–€2,570,000 → 0.70%
• €2,570,001–€5,000,000 → 1.00%
• €5,000,001–€10,000,000 → 1.25%
• Over €10,000,000 → 1.50%

When you sell a property in France that is not your main residence, you are generally required to pay capital gains tax. This tax consists of two components: an income tax portion of 19% and social charges of approximately 17.2%.

There are reductions available over time. After five years of ownership, you start to receive relief on the income tax portion, with full exemption granted after 22 years. Social charges decrease more gradually, becoming exempt after 30 years of ownership.

If the property is your main residence, you are typically exempt from capital gains tax upon selling.