New CGT rules, but what other taxes can homeowners expect?

Posted on 03 October 2013

The year-long period during which vendors of property in France get a discount of 25 per cent on both capital gains tax (CGT) and the social charges kicked off in September, with hopes it will fuel sales in the property market, including in Alpine resorts.

Also from 1st September, the time over which complete exemption from capital gains tax is granted has been reduced to 22 years from 30 years of ownership, with tapered relief from the sixth year of ownership.

With CGT in the headlines, it’s worthwhile taking a brief look at what other taxes an owner of a new property in the French Alps should expect to pay. The good news is that it is normal for new property developments to be exempted from the local land tax (taxe foncière) for the first two years following construction. However, this does not always apply, and when it does it may not be a total exoneration, since the local authority will often reserve the right to charge at least a part of it. Otherwise, owners in France have two types of annual rates to pay – taxe fonciere and taxe d’habitation.

Just as is the case when buying any property in France, French income tax is applicable on rental income derived from the property. This is the case even if you are not resident in France. It is the owner’s responsibility to register for the tax at the relevant tax office.

If you are UK resident, you should also declare the income on your UK tax return, although the double taxation treaty will mean you don’t the same tax twice. If you are UK resident you will need to declare your French income at the Centre des Impôts des non-résidents in Noisy Le Grand – it’s common for non-residents to employ a local accountant to assist.

Then there is VAT (TVA). There are a number of ways in which TVA is applicable on new-build properties. TVA is applied on the development of a new house – but not the land if this was purchased separately.