Real Estate

What are the consequences of buying a property in France?

P1040987 a 635

By Prof. Robert Anthony and Dr. Michael Annett, Anthony & Cie.

When considering the purchase of property in France, it is important to be aware that property ownership will have consequences under French inheritance laws, and can generate French inheritance tax, capital gains tax, income tax, social charges and wealth tax liabilities. In specific cases, typically new builds, VAT at 19.6%, is also a factor to be considered as this is applied to the purchase of new and relatively new French property1, although this VAT can be claimed back under certain conditions2.

If the purchase is made with the intention of selling after a short period of time, or even if this is what happens in practice, great care must be taken as whilst the French tax administration may well consider the sale to have been effected by you personally, they can consider you to have been acting as a property developer. If so, the applicable tax regime is then very different from the one applicable to private individuals since the requalification is to a business activity, with all the consequences that this would entail.

In light of the above, it is essential to seek professional advice in order to properly structure the ownership of any French property and mitigate any fiscal impact in the event of a potential sale or inheritance.

[1] In most cases registration or stamp duties, at 5.09%, are applicable. Notary fees, amounting to approximately 1% of the purchase price, are charged. Compulsory tax representative fees, amounting to 1% of the purchase price, are charged if the sale is made by a non-French tax resident (they are due by the seller). The purchase of a constructible plot of land is subject to VAT, except if purchased by an individual for habitation. The purchase of a new built property less than 5 years old and which has never entered the scope of VAT is also subject to VAT. If important works are carried out on the property, the French tax administra¬tion could requalify the property as a constructible plot of land. A special VAT regime known as the "livraison à soi-même" regime is also applicable upon completion of some construction works.

[2] If the property is rented out after purchase and if specific Services are provided, such as breakfast, cleaning, laundry, reception.


Robert Anthony 1Prof. Robert Anthony
Anthony & Cie
T: +33 4 93 65 32 23
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Anthony & Cie is an independent international family office, based on the French Riviera as well as located in Paris and in London. Since its creation in 1978, Anthony & Cie orchestrates financial, real-estate and tax advice as well as French legal advice.

Professor Robert Anthony is the Principal Partner of Anthony & Cie and Co-Founder of Anthony & Co UK Ltd. He is a Professor of International Tax Law (Thomas Jefferson School of Law, California). He is a Chartered Certified Accountant (UK) and Certified Financial Planner (France). He is also a member of the board 'Sophia Business Angels'.

 

 Annett Michael 121pxDr. Michael Annett
Anthony & Cie
T: +33 4 93 65 32 23
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Dr. Michael Annett is a co-director of Anthony & Cie International, in addition to his numerous UK financial, fiscal and IFA qualifications, and in France, already conforms to French forthcoming regulations on patrimonial legal and fiscal advice.

 

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