If you want to buy a house in France, it is important to know what taxes you will have to pay. There are several taxes involved when buying and owning a second home in France. We list the French taxes!

Taxes when buying a second home in France

Are you going to buy a vacation home in France then you pay transfer tax just like in the Netherlands. This amounts to 5.7 percent of the purchase price of the property and it is part of the average 7.7 percent ‘cost of ownership’ in force in France (also called ‘frais de notaire’ or ‘frais de l’acte de vente’). New or equivalent properties taxed with VAT are an exception to this rule. If the property is over 1 million euros, a rate lower than 7 percent applies. For a home under 100,000 euros, you should expect an average rate of 10 percent.

Taxes as an owner of a vacation home in France

If you buy a vacation home in France, you also have to pay the taxe foncière. This tax can be compared to the owner’s portion of the property tax. It depends on several factors, such as the municipality where the house is located. Differences can range from several hundred to thousands of euros on an annual basis. The real estate agent or seller is required to report the amount of this tax when purchasing the home.

In addition, as an owner, you pay the taxe d’habitation, similar to the user part of the property tax. This tax is based on the rental value and the habitable area. Again, there are large differences between municipalities. You can avoid this tax as an owner by (partially) renting out the property for permanent residence or as a vacation home. The Macron government plans to abolish the taxe d’habitation, but only for houses that count as the owner’s main residence. In an increasing number of municipalities, this tax is combined with the assessment for the viewing and listening fee, sewerage fee and waste disposal fee.

As the owner of a second home in France, you must also take into account the Dutch wealth tax. You are required to declare the value of your French home in box 3. However, thanks to the French-Dutch double tax treaty, you can deduct this. Because you are thus exempt from the Dutch wealth tax, you may have to deal with the French wealth tax: the impôt de solidarité sur la fortune immobilier (IFI). In France, there is an exemption of 1.3 million euros. If the value of your second home is lower, you do not have to pay wealth tax. However, as soon as the property is worth more than 800,000 euros, you must already file a wealth tax return. But the exemption applies up to 1.3 million euros.

You are then required to keep full accounts. You have to keep full accounts and on the profit you pay 49 percent tax and social charges. Most Dutch people who rent out a second home in France have a gross rental income between 895 euros and 85,800 euros per year. Here, tax regulations are quite complex. Owners who have their property classified by the government pay 5.6 percent of the gross rental income in taxes and social charges. Those who do not, pay 10.6 percent. Such a classification costs a few hundred euros (one-time cost, depending on the location and size of the house) and is valid for five years. So you can easily calculate whether classification makes sense (in most cases it does).

Finally, there is a rule that a tax debt of less than 305 euros per year is waived. But anyway, you do have to declare your taxes when your rental income exceeds 895 euros. Failure to declare tax is considered an administrative offense.

Tax when selling French vacation home

Do you want to sell your second home in France? Then you must take into account the taxe sur la plus-value (profit tax). If there is no increase in value, and therefore no profit, you pay no taxes. Otherwise, the tax is 27.6 percent of the increase in value after deducting demonstrable improvement costs. This rate only applies if the home is sold within the five years. Between the fifth and thirtieth years of ownership, the tax decreases with each additional year of ownership. After thirty years, the gain tax expires.