Do you own a house in France or want to buy a vacation home? Then you come into contact with different types of taxes. That seems like a lot, but the French tax system is still more favorable for the second home owner compared to the Netherlands. When buying a vacation home in France, the buyer pays a tax similar to Belgian registration duty or Dutch transfer tax. This amounts to 5.7 percent of the purchase price and is part of the average 7.7 percent buyer’s fee, which applies in France. Also called ‘frais de notaire’ or ‘frais de l’acte de vente’.

The exception to this is the purchase of new or equivalent property that is subject to VAT. For houses over 750,000 euros, a lower rate of 7.7 percent applies (the more expensive the house the lower the rate), for houses under 100,000 euros a higher rate applies (between 7.7 and 10.5 percent).

User portion, taxe d’habitation

Then there is the taxe d’habitation, the user portion of the property tax. The taxe d’habitation does not apply to houses that count as the owner’s primary residence. This tax is based on the rental value and the number of square meters of habitable area. Again, there are large differences between municipalities, again ranging from several hundred to several thousand euros per year. If the owner rents (part of) the property professionally, either for permanent residence or as a vacation home, he can avoid this tax. More and more municipalities are combining the taxe d’habitation with the assessment for listening and viewing fees, sewerage fees and waste disposal fees, if any, in one assessment.

Owner’s portion, taxe foncière

As an owner of a French home you pay taxe foncière. This tax is similar to the owner’s portion of the property tax. Based on a rather complicated calculation, it is based on the number of square meters of the plot and the level of luxury. In addition, all kinds of surcharges for local and regional governments. The differences in the amount of this tax is huge. From several hundred to several thousand euros per year, depending entirely on the municipality. This is the reason why an estate agent (or the seller) is obliged to state the amount of this tax when advertising a property for sale in France. The difference in taxes per municipality for comparable properties can be so big that they can influence the purchase decision.

Surprise on sale: profit tax, ‘taxe sur la plus-value’

As an owner, are you finally going to sell your second home in France? Then the French tax authorities have another surprise in store for you: the ‘taxe sur la plus-value’. Also called the profit tax. If there is no increase in value, i.e. no profit, then the tax is zero. Otherwise, it is 27.6 percent of that increase in value after deducting demonstrable improvement costs. Own tinkering and self-bought building materials are exempt. Only invoices from licensed contractors are accepted. Repairs are also excluded. Deductible expenses relate only to items that led to improvement of the home. The 27.6 percent rate applies only if the home is sold within five years. If the home is not sold until after 30 years of ownership, the tax is forfeited. Note: Between the fifth and 30th years of ownership, with each additional year of ownership, the tax goes down a step. This is not linear, by the way.

Tax on rental income from your vacation home

Does the owner rent out the second home? Then tax will have to be paid on the rental income. Not in Belgium or the Netherlands, as some owners believe, but in France. If the total gross rental income is less than 895 euros per year then nothing has to be declared or paid. If the income is higher, tax returns must always be filed with the special tax office for foreigners SIPNR (Service-Public). Useful to know is that every taxpayer is required to self-report to the tax authorities in France.

Waiting for the tax authorities to take action is unwise and can result in a fine. If the gross rental income is higher than 85,800 euros per year, then the landlord, even if tax liable in the Netherlands, must register as a professional landlord with the French Chamber of Commerce. In addition, full accounting records must be kept. Keep in mind that about 48 percent tax and social charges must be paid on the profit. However, as long as the gross rental income remains below 540,000 euros per year, no corporate tax has to be paid.

Dutch wealth tax, box 3

The owner of a second home in France also has to deal with Dutch wealth tax. The value of the French property must be declared in box 3. To avoid double taxation, this value can be deducted again immediately. This is because the French-Dutch tax treaty stipulates that real estate is only taxable by the country where the property is located. The calculation for declaration and deduction are different, so the result is not always zero. The non-resident owner of a vacation home will not face French wealth tax as long as the value of the property remains below 1.3 million. This tax is also called the Impôt de Solidarité sur la Fortune Immobilier (IFI) in France. If you are an owner officially living in France, you may have to deal with this earlier, depending on the situation. But, there is always an exemption of 800,000 euros.

When does it get complicated?

It gets complicated between 895 euros and 85,800 euros of gross rental income per year. This applies to most Dutch people with a second home in France that they rent out. The tax for non-residents is 20 percent of profits up to a gross rental income of 27,519 euros per year and 30 percent above that. Thus, one must reckon with 20 percent (and a portion 30 percent) remittance on the theoretical profit. In case the vacation home is classified, this amounts to 29 percent of the gross turnover. Is your vacation home not classified? Then it amounts to 50 percent of gross sales. Just résumé: So with a classified vacation home, that’s 20 percent of 29 percent: 5.6 percent. For an unclassified vacation home, it’s 20 percent of 50 percent: 10.0 percent. France is not allowed to levy social charges on French income of non-residents. Precisely the reason why the French tax authorities have made a new “solidarity” tax out of that with a rate of 7.5 percent (we’re not allowed to call that social charges…).

So, for a classified vacation home up to a turnover of up to 27,519 euros must be remitted: 27.5 percent of 29 percent of the turnover. That is 8.0 percent of the gross rental income. All income above 27,519 euros per year is taxed at 37.5 percent of 29 percent. That’s 10.9 percent. For an unclassified vacation home up to a turnover of 27,519 euros must be remitted: 27.5 percent of 50 percent of the turnover is 13.7 percent of the gross rental income. All income above 27,519 euros per year is taxed at 37.5 percent of 50 percent is 18.7 percent. Finally, there is a rule there that a tax debt of less than 305 euros per year is waived.

Invest in a vacation home in France

If you want to buy a house in France, be sure to visit the Second Home Fair. Besides offers from various estate agents, it is also possible to get informed about the things that are involved when you buy a holiday home in France. This can be done by attending one of the seminars or by talking to the experts present. If you are not able to visit the Second Home Fair, you can of course start your search online. View the offer of vacation homes in France here.