The system of tax in France

Tax in France is complicated and, whether you are buying property to emigrate to, have a holiday in or generate income from rental in France, you will have to pay tax at some point. A foreign buyer becomes a tax resident of France after 183 days or if their living property is in France. Even if you never visit France but earn a rental income you will need to stump up for tax at some point.

Income tax in France

Impot sur le revenue des personnes physiques is payable on worldwide earned income if you are a resident of France. Non-residents must still pay on any income earned in France. The rates of income tax in France for 2006 are as follows:

Up to €5515 – 0%
5516 to €10,846 - 5.5%
10,847 to €24,432 - 14%
24,433 to €65,559 - 30%
Over €65,559 - 40%

Paying tax in France on rental income

Contribution sur les revenues locatifs is payable on rental income received from a property in France. If the amount of rental income in France you receive in a year is less than €76,300 it is taxed at the rate of 25%.

Rental income from property in France must also be declared in the UK although you will not pay twice because of the dual tax treaty between the UK and France.

Inheritance tax in France

Inheritance tax in France is an issue for anyone considering buying French property. France has a quite unique system of inheritance tax, which is payable on any property owned by non-residents. Legislation introduced last year means estates up to €100,000 are free from inheritance tax in France. However, inheritance tax in France continues to cause a great deal of anxiety.

Other types of tax in France

Professional tax (taxe professionelle) is levied on those using their property to work from home.

Wealth tax (impot sur la fortune) is applied when an annual household income exceeds €732,000

VAT (TVA) is payable on most things in France and the current rate is 20.6%.

Bouclier Fiscal

Combined income tax, wealth tax and other charges cannot now exceed 60% of the taxpayer´s entire income. This provision is known as the Bouclier Fiscal.

Where taxes exceed this threshold the taxpayer will have to claim a refund of the extra payment.

Tax in France and tax in the UK?

The double tax treaty means that UK nationals resident or otherwise in France do need need to pay tax on their worldwide income twice. Anyone in this bracket should contact the Inland Revenue.

There are many taxes linked to property in France whether through rental, buying or selling. The system of tax in France can be complicated and professional tax advisors can ensure you do not pay anymore than is strictly necessary.