Taxation of secondary homes in France | Cabinet Roche & Cie (2024)

FAQs

What taxes do you pay on second home in France? ›

All properties are liable for Taxe Fonciere (land tax), these are broadly related to the rental value of the property. Unfurnished, vacant properties are covered by Taxes sur les logements vacants (TLV), this is payable on vacant unfurnished properties. This does not concern many properties in the French Alps!

The MP is therefore proposing that for 2024 neither capital gains tax nor social charges are applied to second-home sales. The standard rate for these are 19% and 17.2% respectively, although social charges are reduced to 7.5% for people living in EU countries and the UK.

The 17.2% tax surge post-Brexit: what it means for you

Before Brexit, UK residents owning a second home in France paid a standard social levy of 7.5%. This was charged on the net rental income and capital gains of the second property and was the same for both French and non-French citizens.

People over the age of 75 whose reference income for the previous year does not exceed certain limits are exempt from tax on their residence (primary and secondary). There is also an exemption for people with low incomes. We can provide you, at your request, with the amount of income thresholds.

The changes will come into force on January 1, 2024, and allow communes listed as a zone tendue – where there is a housing shortage and high second home ownership – to levy a surcharge of potentially 60% on the taxe d'habitation, which is now only payable on second homes.

The taxe d'habitation (sur les résidences secondaires)

Second-home owners of non-vacant (ie. furnished and lived in for some of the year) still have to pay the standard taxe d'habitation. This tax no longer applies to main homeowners and is now only payable by second-home owners.

A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.

The seller must have owned the home and used it as their principal residence for two out of the last five years (up to the date of closing). The two years do not have to be consecutive to qualify. The seller must not have sold a home in the last two years and claimed the capital gains tax exclusion.

Similarly, if your French property is the third or fourth one that you own, it can still be considered to be a 'résidence secondaire' by French tax authorities. It is possible to have several secondary residences in France, but you would only have one 'primary residence'.

Capital Gains Tax in France

The basic rate of capital gains tax is 19%. Tapered relief against the tax is granted over 22 years of ownership, commencing from the 6th year of ownership, as follows: No allowance for the first 5 years of ownership. Between 6 and 21 years of ownership: 6% allowance per year.

How can I avoid double taxation in France? ›

In order to avoid double taxation, tax deducted at source in France gives rise to an equivalent tax credit in the country of residence (depending on the tax treaty between France and the country of residence). Helpful tip: Most international taxation treaties make provision for temporary postings.

CSG/CRDS on passive income and capital gains is increased by a social tax surcharge, resulting in a total rate of 17.2%. A non-resident's tax liability may not be less than 20% of net taxable income for income between EUR0 and EUR26,070 and 30% for income exceeding EUR26,070.

The First and Second Estates were exempted from most taxes. The Third Estate retained the burden of producing the wealth for the two privileged Estates and also the responsibility of paying nearly all of the taxes.

The purpose of the Declaration d'Occupation is to ensure that French homeowners still subject to the Taxe d'Habitation (i.e. second-home owners and owners of vacant properties) are correctly entered in the system and to avoid incorrect Taxe d'Habitation charges to those who use their French properties as their primary ...

Taxe d'habitation is an annual property tax levied on furnished second homes. It was previously levied on all homes, however from 2018, it was gradually phased out as a tax on main homes. In 2023, it only applies to second homes.

To make this one-off property declaration, you can either visit your space on impots.gouv.fr or call your Centre des Impôts. If you go online, look under Bien Immobiliers. The service is available in English, which is indicated by a British Flag on the right, near the top.

There are two local annual taxes, the 'taxe d'habitation' and the 'taxe foncière which are both are levied in October / November. These taxes are based on the cadastral value of the property. The rates of tax are set by the région, the département and the commune and vary from one district to another.

French income tax on rental property

If you rent out a French property, the net income is taxed at the scale rates of income tax, which range from 11% for income over €10,777 to 45% for income over €168,994 (for 2022 income), plus 17.2% social charges (reduced to 7.5% for S1 holders).

The IFI (french real estate wealth tax) is due annually by all non-residents, i.e. people resident outside France for tax purposes, once the net value of their French real estate assets exceeds €1.3 million on 1 January.