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Roche & Cie Chartered Accountants Since 1948 Specialists in for Non-Residents

INVESTING IN PROPERTY TAXATION 2018

www.cabinet-roche.com www.cabinet-roche.com Roche & Cie

Specialists in property for non-residents, Roche & Cie will assist you in the purchase/resale and annual fiscal monitoring of your second home in France.

• Preliminary study for a purchase or rental of a property • Legal framework • Accounting and preparation of declarations

Please do not hesitate to contact us for further information.

Roche & Cie 40 rue du Pdt Édouard Herriot BP 1222 69202 Lyon Cedex 01 +33 (0) 4 78 27 43 06 +33 (0) 4 78 27 00 95

[email protected]

Roche & Cie Property in France

France is one of the finest destinations for Taxation tourism and property investment for non- residents. However, taxation, administrative and Practical and legal constraints are all areas of concern for foreign investors.

Advice At Roche & Cie, our philosophy is to assist you at every stage of your project, in order that your investment in France combines legal security, optimisation and pleasure.

Sandy Dalmas Associate

www.cabinet-roche.com Purchasing a property in France

SIGNING THE EXCHANGE OF CONTRACTS Payment of 5 to 10% of the purchase price. OFFER TO PURCHASE

10 DAY SECURING OF +/- 2 MONTHS CANCELLATION A MORTGAGE, > NOTARISED PERIOD IF REQUIRED SIGNATURE OF THE The purchaser has the right DEED OF SALE to annul the purchase without In the presence paying any compensation. of a notary. Payment of the purchase price and handing over of keys.

Roche & Cie Only the purchaser is liable for the notary fees. Example The purchaser also pays for the registration costs. Purchase of an Total costs represent existing property approximately 7% with a value of of the purchase price. €2,000,000 Notary fees of approximately €18,000

Taxes of approximately €122,000

Breakdown of costs

6.1% Registration costs and % 0.9 miscellaneous fees Notary

www.cabinet-roche.com Local

In France, there are essentially two local taxes called ‘taxe d’habitation’ (residence tax) and ‘taxe foncière’ ().

Good to know: You receive your tax notification directly by post. You also have the possibility to pay and receive this information on-line:

www.impots.gouv.fr

Property Residence tax tax This tax is due each year by the owners This tax applies to all housing (principal of a built or unbuilt property (dwellings, and secondary residences) and all occu- industrial and commercial premises, pants (owners or tenants). land etc.). This tax is calculated directly by the tax The property tax is calculated by the authorities in relation to the location of tax authorities in relation to the notional the occupant on 1st January of the tax ‘cadastral’ rental value of the property year. The amount due is calculated by and the rate determined by the local multiplying the net rental value of the authorities. real property by the determined by the regional authorities.

Payment deadline: MID-OCTOBER Payment deadline: MID-NOVEMBER

Roche & Cie Taxation of rental income (seasonal rentals)

FLAT-RATE PLAN ACTUAL PLAN

Rent > €70,000/year CRITERIA Rent < €70,000/year Or optional

Deduction of actual costs and Application of a 50%* lump-sum expenses: water, electricity, DETERMINATION allowance on charges. insurance, service/management OF TAXABLE charges, maintenance and repair * The leasing of classified holiday BENEFITS furnished benefit from lump-sum costs, interest on borrowing, allowance of 71% (if rentals<€170 000) property tax, accounting depreciation etc.

Revenue declared per calendar Revenue declared per calendar year. Rents reported directly on year. Income statement filed be- DECLARATION the declaration of fore 31st March of the following (declaration deadline 31st May year. of the following year).

Profit is taxed At the prevailing rate for French residents + social security contributions of 17.2%

At a minimum tax rate of 20% for non-residents + social security contributions of 17.2%

www.cabinet-roche.com I.F. I*: Real Estate (*Impôt sur la Fortune Immobilière)

Who is liable for this tax ? You are liable for the IFI when the net value of your real estate wealth is greater than 1.3 million . Taxable assets All built and unbuilt properties (building land, « ln fine « loans (single amor- tization at the end of the loan) agricultural land, ... ), real estate assets, shares They become partially deductible. of real estate companies. The debt is reduced by a prorated Principal/main residence: (If the is amount taking into account the number of years spent on the total in France), 30% allowance. number of years of the loan (thus creating a gradual depreciation and therefore a reduction of the deductible debt).

Deductible liabilities Debts contracted in the family Since the last Finance Act, only certain debts circle These debts are not deductible are deductible. (unless they are contracted from GENERAL RULE: are deductible the debts ascendants/descendants, brother/ sister and only IF the persan liable existing on January 1 of the taxation year justifies the normal nature of the and which are related to the acquisition loan conditions) of the property, the expenses of repairs, Limitation beyond 5 million euros maintenance, construction, reconstruction or of assets enlargement. When the total value of the taxable assets exceeds 5 million euros, and TAX DEBTS: only those related to the the amounts of debt admitted for taxable properties deduction exceeds 60% of this value, the portion exceeding the 60% is LOANS AND BANK DEBTS only deductible for half its value.

Roche & Cie Rate (effective on 1st January 2018)

FRACTION OF THE NET TAXABLE VALUE OF WEALTH APPLICABLE RATE

Up to €800,000 0%

From €800,000 to €1.3 million (inclusive) 0.5%

From €1.3 million to €2.57 million (inclusive) 0.7%

From €2.57 million to €5 million (inclusive) 1.0%

Between €5 million and €10 million (inclusive) 1.25%

Above €10 million 1.5%

Facts relevant to non-residents Non-residents are only taxed on their real estate located in France.

In addition, foreign citizens settling in France benefit from an exemption on their property abroad up to the end of the 5th year following their move to France.

www.cabinet-roche.com Capital Gains on Property

Capital gains tax on property is determined as follows:

PRICE OF SALE – PURCHASE PRICE* = NET CAPITAL GAIN

The net capital gain is determined after the deduction of allowances for the holding period, in accordance with the table below.

Rate of allowances applicable in each year of ownership PERIOD HELD Income tax base Base for social security + additional tax contributions

Less than 6 years 0% 0%

From 6th to 21st year 6% 1.65%

End of 22nd year 4% 1.6%

Beyond 22nd year Exempt 9%

Beyond 30th year Exempt Exempt

The tax rates are as follows: 19% for income tax + additional surcharge of 2 to 6% + social security contributions of 17.2%

* The purchase price may be increased by the following amounts: • Purchase costs (actual amount or a flat-rate of 7.5% of the purchase price). • Actual amount spent on construction, reconstruction or expansion; or if the property has been owned for more than 5 years, there is a possible option for a flat-rate of 15% of the purchase price. Roche & Cie in France

Transferring your assets Inheritance taxation Are you subject to French civil law? The transfer of your estate is subject to (law of inheritance) French tax if:

Applicable law = Civil law of the • Your last place of residence was in deceased’s last residence France. EXCEPT IF: He/she has provided in • Your assets are located in France. a will that the applicable law should be • Your heirs/beneficiaries have resided that of the country of his/her nationality. in France for at least 6 years during the French law provides that it is not 10 years preceding the transfer in the possible to disinherit one’s children absence of a taxation treaty. (principle of the ‘réserve héréditaire’/ family inheritance allocation).

EXEMPTED SPOUSE

CHILDREN €100,000 allowance per child, every 15 years

Rate (differs according to relationship)

GIFT TAX FOR DIRECT INHERITANCE

TAXABLE AMOUNT AFTER ALLOWANCES TAX RATE

Less that €8,072 5%

Between €8,072 and €12,109 10%

Between €12,109 and €15,932 15%

Between €15,932 and €552,324 20%

Between €552,324 and €902,838 30%

Between €902,838 and €1,805,677 40%

Above €1,805,677 45%

www.cabinet-roche.com Practical advice

Health and Sickness Insurance

Resident of a country in the and Switzerland: You will be insured in the same way that you are in your country of origin. This will in turn qualify you for a European health insurance card.

Any non-European Union citizen: You are legally obliged to take out private insurance to cover your medical and hospital expenses.

Visas

Do I need a visa to go to France?

I am a citizen of the European Union, from the European Economic Area, from Switzerland or Monaco: No

I am a citizen of another country: Short stays (-90 days): Mandatory visa* Long stays (+90 days): Mandatory visa

*except for certain countries (Australia, Canada, United States, Japan etc.)

To obtain a visa for France, you must contact the visa office of the French embassy or consulate in your country of origin.

Driving License

License from the European Union: Valid License outside the European Union: Valid only for short stays (<185 days)

If you fall outside these two categories, it is necessary to obtain a permit in France. It is also possible to drive in France for one year with a foreign license or, for certain countries, to obtain recognition of your foreign license.

Roche & Cie