Buying property in France appeals to many Britons, having a warmer climate, rich culinary culture and relatively cheaper house prices. There are, however, tax obligations that you should understand before you make the move.
Cross-border specialist advice can help to ensure you take the most tax-efficient route for owning property in France, and that your estate planning wishes for your family are met.
Does buying a property in France make you a tax resident?
The first consideration for tax residency in France is intent. If you plan to remain permanently in France and use the property as your principal home, you become a tax resident the day after you arrive in the country.
However, if you plan on spending around half a year at your French property as a holiday home, you must be fully informed on tax residency rules to ensure you pay tax in the right country.
You are regarded as a tax resident of France if you meet any of the following criteria:
- A French property is your main private residence
- You spend more than 183 days per year living in France
- Your primary occupation is based in France
- The majority of your income is sourced from France
- The majority of your assets are located in France
If you become a tax resident, you will be taxed on any income, property, or capital gains worldwide. Whereas non-residents will only be taxed on property owned, or rights over property, located in France.
French residents are taxed on the value of their household’s worldwide real estate assets each year. This includes all residences (though the value of a main home can be reduced by 30% for wealth tax purposes), holiday homes and investment properties, even if owned indirectly. Non-residents are liable on French real estate, including any rights over property situated in France.
However, you’ll only pay wealth tax if your total taxable property assets are worth €1.3 million or more. There is an €800,000 tax-free allowance, with rates then ranging from 0.5% to 1.5%.
In addition, according to the tax treaty between France and the UK, for the first five French tax years after becoming a resident of France, the wealth tax of a UK national will only be based on real estate in France and all other real estate assets will be ignored.
Capital investments, bank accounts etc., have not been liable to wealth tax since 2018.
French succession tax and forced heirship
An important thing to note with French inheritance tax is that beneficiaries are charged individually, with rates and reliefs varying dependent on their relationship to you. The rates for your children will start at just 5%, and they can also expect to receive more important allowances than other beneficiaries.
There are no inheritance taxes on the death of the first spouse when assets pass to the surviving spouse.
Other family members will typically be taxed between 35%-55% and are afforded much less allowance, while non-relatives will be taxed 60% with almost no allowance.
Tax rates that favour children have their roots in Napoleonic law; a set of rules which aims to protect the family bloodline and is still reflected in France’s position on forced heirship. In August 2021, changes to succession law were approved that allows children to appeal a will that does not follow reserved heirship rules for assets located in France. The legislation may yet be challenged by the European Courts, as it contradicts the EU succession regulation ‘Brussels IV’, but seek cross-border advice to stay updated on the situation as it unfolds.
Be aware of local property taxes when buying property in France
Regardless of your tax residency status, you will be liable to pay local taxes on residential property in France.
Taxe d’habitation is based on notional rental value, which is multiplied by the fixed local tax rate. It is paid by the property resident, but is being phased out and should be removed on main residences only in 2023..
Taxe foncière is paid by the owner and is also based on the notional rental value.
Allowances, deductions and exceptions can be applied to the above taxes. It is therefore advisable to seek professional advice from a cross-border wealth management specialist to consider the best options for your circumstances.
Blevins Franks are experts at helping British expatriates make the most of their wealth in the most tax-efficient way possible. We provide integrated, cross-border advice on tax planning, estate planning, investments and UK pensions. Our overriding aim is to give you peace of mind that your financial affairs are in order, for today and the future, for yourself and your family and heirs. We can also guide you through the new residence rules post-Brexit. We have ten offices across France and our advisers would be happy to discuss your plans to move to France and how we can help.
+44 (0)20 7389 8133
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices, which are subject to change. Tax information has been summarised; individuals should seek personalised advice.
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