Each year, as a French property owner, you will receive several tax bills from the French tax office. In addition, as you are letting the French property you will be subject to further taxes directly related to the rental activity.

 

This document seeks to explain the tax bills you will receive, so you have a guide for future reference.

 

 

Taxes Applicable Taxes Applicable To Rental Properties	Cotisation Foncière des Entreprises (CFE)   Taxe de Sejour (TS)   Impôt Sur Le Revenu (IR)   Prélèvements Sociaux (PS)
General French Property Taxes	Taxe Fonciere (TF)   Taxe d’Habitation (TH)   Contribution à l’Audiovisuel Public (TV)   Impôt Sur La Fortune Immobilièr (IFI)

 

  

 

 

Introduction to the Taxes Applicable To Rental Properties

 

If you rent out your French property(ies) you could be liable for the following French taxes.

 

A). Furnished Lettings:

 

The following two levies only apply to furnished lettings. The second – Taxe de Séjour – only applies to an activity providing furnished holiday lets (gîtes etc).

Neither depends on a profit being made, they are levied either as a function of the rateable value (size and composition) of the property, (CFE) or as a function of turnover (Taxe de Séjour)

 

If you have registered a furnished rental activity at the French property, you will be liable for CFE which is a professional tax (equivalent to business rates).  However, you may be entitled to claim for an exemption, partial exemption or capped, depending on the characteristics of the letting activity (some private use, regulated ‘Meublé de Tourisme’, etc), and whether or not the principle of access to an exemption has been made available by the Commune in which your property is located.

 

As part of our additional services, we can apply to the local tax office to clarify whether you will qualify for the CFE exemption. However, this could take some time so we strongly advise you to contact your mairie to confirm the position and come back to us.

 

If you are liable to pay the tax, then as a general rule of thumb the amount of CFE will be comparable to that of your Taxe D'Habitation or Taxe Foncière bills, however, this is only a general indication.

 

In the event you don’t qualify for any form of exemption, we do offer a service to apply for CFE to be capped by reference to the level of your rental income, assuming of course that there is a saving to be made. This is only possible after the tax returns for the same tax year have been submitted, as we need to compare the tax bill with the letting figures.

 

The tax demand is usually sent out in November and is payable by mid-December via your Espace Professionnel that we set up for you (unless this has been set up already), or unless you elect to pay on a monthly or annual basis by direct debit.

 

Taxe de Sejour (TdS) is a tourist tax and is in theory a tax on the holidaymaker but is calculated, collected and paid by the property owner. The purpose of the tax is to contribute towards the cost of promoting and catering for tourism in the area, (tourist information desks etc).

 

The tax charge is based on a nominal amount per head per night. The rates applied may be reduced in the event you have chosen that your property should be regulated under the Meublé de Tourisme Classé system, (more information on this can be found here). TdS is then usually paid to the local town hall - Mairie.  The amount payable varies from Mairie to Mairie. Please note that following new legislation applied from 01/01/2019, the tax rates have been updated.

 

Currently, Charles Hamer does not deal with this tax but this is something we are aiming to introduce later in 2022. Until we do, we strongly advise you to contact your local Mairie or tourism information centre to find out what the liabilities are and when they are due to be paid. More information on the tax rates applied in your area here.

 

In the event the property is not let on a permanent basis, but for short term holiday rentals, you will have to inform your Mairie of the existence of the letting activity via this link.

 

Calculation of Taxable Profits – Furnished Lettings

Each year, when we do your annual tax returns, we will calculate the French income tax which we believe will be payable following the tax office assessment.

The French tax year runs from 1st January to 31st December, and for non-French residents the tax return needs to be completed and submitted to the local French tax office by the by the beginning of the following May and to the non-resident tax office by June (current rules).

The payment of any income tax due in the first year will be a single payment upon receipt of the tax assessment from the tax office. However, for the following year, you will be asked to make monthly payments on account – a system called PAS (Prélèvement A la Source), based on the bill issued in the previous year. The balance is then paid/refunded once the tax assessment for that year has been assessed.

Usually, the income can be assessed under one of the following 2 methods:

1). Régime des Micro-Entreprises (RME)

This method does not apply to the assessment of profits generated by a company or when the activity is registered in more than one name.

Otherwise, if the activity is registered as the equivalent of sole trader status, (“exploitant individual”), whenever total turnover for the year is less than 72 600 €, unless the taxpayer opts for an alternative method, the tax office will apply the "Régime des Micro-Entreprises", whereby profits are normally deemed, irrespective of actual relevant expenditure, to be 50% of turnover, (net of TdS).

If the property has been registered for regulation and quality rating / classification by the local tourist office under the Meublé de Tourisme Classé system then, the under this RME route, profits are deemed instead to be 29% of turnover (net of TdS) and the turnover threshold is raised to 176.200 €.

For a taxpayer not resident in France, French income tax is then charged at 20% on this deemed profit. In effect then, under RME, income tax amounts to 10% or 5.8% of turnover, (depending of the status of the property), irrespective of actual expenditure.

For a French tax resident, the deemed profit is added to other taxable income and taxed at the prevailing composite rate applicable to the household.

2). Régime (Réel) Simplifié (RS)

This method is applied by taxpayer option when turnover is less than 70 000€ and compulsorily if it exceeds that.

The regime calculates profits by reference to turnover and actual qualifying expenditure plus a provision for depreciation / a writing down allowance of the property itself.

Losses can therefore arise, either due to qualifying expenditure exceeding turnover or due to the writing down allowance or a combination of both.

As a result, RS potentially offers a more tax efficient approach than RME, but it boils down to typical expense levels and the writing down amount relative to turnover.

If there are taxable profits, for a taxpayer not resident in France, these will be assessed at a base reference rate of 20%. For profits arising in 2021 the tax office can uplift profits by 15% to balance against the possibility of non-qualifying expenditure having been claimed. Therefore, if you have a profit of 1.000 € in 2021, the income tax due in 2022 would be 230 €, (1,000 uplifted to 1.150 @ 20% = 230€). Currently this ability uplift is to be reduced to 10% for profits generated in 2022 and dropped altogether for 2023 revenues and onwards.

For a French tax resident, the profit is added to other taxable income and taxed at the prevailing composite rate applicable to the household.

 

 

 B). Unfurnished Lettings.

 

Unlike furnished lettings, there are no taxes or levies equivalent to CFE or TdS which directly consequential to the activity or turnover. Charges only arise if taxable profits are generated.

Calculation of Taxable Profits – Unfurnished Lettings

Payment of income tax follows the same methodology described under furnished lettings.

As regards how taxable profits are calculated, as is the case for furnished rentals, the income can be assessed under one of the following 2 methods, albeit this time there is no default assumption requiring taxpayer explicit election and the treatment of expenditure differs.:

1). Régime Micro-Foncier (RMF)

Subject to very limited exceptions which relate to particular categories of property, this route is available when annual turnover doesn’t exceed 15.000 €.

 

As with RME profits are deemed, irrespective of actual relevant expenditure, to be a function of turnover, this time 70%.

For a taxpayer not resident in France French income tax is then charged at on this deemed profit. In effect then, , (depending of the status of the property), 20%under RMF, income tax amounts to 14% of turnoverirrespective of actual expenditure.

For example:

 

If turnover is 10,000 € the amount of tax payable will be 1,400 €.

For a French tax resident, the taxpayer has the choice of either 70% of turnover being charged to tax at a flat rate of 12.8% - along with all other investment income – or for the same amount to be added to other taxable income and taxed at the prevailing composite rate applicable to the household.

2). Régime Réel Foncier (RFF)

 

Alternatively, RFF can be applied, (or is compulsory when turnover is above 15.000 € or the property doesn’t qualify).

 

As with RS, profits are arrived at via an income less expenditure exercise, although this time – usually - there are no writing down allowances that can be applied, whilst certain items of expenditure are replaced by a default value.

 

For a taxpayer not resident in France French income tax is then charged at on the outcome, whilst 20%for a French tax resident the taxpayer has the choice as for RMF of either profits to be charged to tax at a flat rate of 12.8% - along with all other investment income – or for the same amount to be added to other taxable income and taxed at the prevailing composite rate applicable to the household.

C). Furnished & Unfurnished Lettings.

 

The following charge is common to profits from both furnished and unfurnished lettings

Prélèvements Sociaux (PS) are applied to the profits of the rental activity. For the most part, (special rules apply to taxpayers who are subject to French N.I. legislation and whose rental activity is sufficiently significant to qualify for to French self-employed NIC), such profits are those arrived at according to the methodology adopted under the income tax rules:

 

PS comprises 3 components:

 

• Contribution Sociale Généralisée (CSG) @ 9.2%
• Contribution au Remboursemnent de la Dette Sociale (CRDS) @ 0.5%
• Prélèvement de Solidarité (PDS) @ 7.5%

 

So, totalling 17.2%

 

for 2021 assessment of 2020 income and assessment of income for earlier years, for both furnished and unfurnished lettings, the French tax office charged a lower rate of 7.5% - representing PDS only - in the following circumstances.

 

• The taxpayer was as at 31/12 of the year of assessment, subject to UK NI legislation by reference to the pre-Brexit Withdrawal Agreement, OR
• The taxpayer was as at 31/12 of the year of assessment, subject to the NI legislation of another EEA state or Switzerland.

 

This is because CSG and CRDS are social / national insurance charges, governed by EU regulation 883/2004 which provides that an individual can only be subject to the NI legislation of one signatory State at any one time. The Withdrawal Agreement, which ended at 00.00 01/01/2021, maintained that Regulation  

 

For 2022 assessments of 2021 income, (i.e. post Brexit), despite Regulation 883/2004 no longer applying in many cases, to be replaced by the provisions of the Social Security Protocol in the Trade and Co-operation Agreement (TCA), the situation will not change.

 

The 7.5% rate will continue to apply to:

 

• UK resident taxpayers who
• Are affiliated to the UK NI scheme and who
• Are not subject to a compulsory French NI scheme

 

For individuals already registered tax resident in France prior to 01/01/2021 and subject to UK NI legislation by reference to the Withdrawal Agreement, the 7.5% rate will be maintained.

 

Technically, the only people caught by the higher, 17.2% rate will be:

 

• French residents who are subject to French NI legislation by reference to Regulation 883/2004 or the Social Security Protocol
• UK residents with a LMP (Loueur en Meublé Professionnel) activity and without an employed or self employed activity which is otherwise subject to UK NIC

 

Treatment of Prélèvements Sociaux in the UK tax assessment.

 

It is now well established that CSG and CRDS are social charges in nature. As yet there is no official acceptance that PDS is a tax but any study of the French legislation would clearly show that it is a tax by nature.

 

UK legislation, via the double tax treaty and TIOPA (Taxation [International and Other Provisions] Act) 2010, provides that foreign tax paid on income also assessable to UK tax can be credited against the UK tax due on that same income. Social charges are not so permitted, neither are they allowed as a business expense.

 

In practice then, if charged, no relief is enabled for CSG and CRDS which therefore contribute to the overall aggregate levy on profits accrued between France and the UK.

 

Therein lies the incentive to minimise French taxable profits for those affected, even if they are already lower than those arrived at under UK rules, (as is likely to be the case for furnished rental income due to the lack of writing down allowances when computing UK profits).

 

.

Introduction To General French Property Taxes

 

There are 4 further possible taxes and levies that apply to the French property owner, which apply irrespective of whether the property is let.

Taxe Foncière is an , whether the property is occupied by them or rented out. The tax is charged to the person owning the property on the 1 January.annual property tax that is levied on property owners^st

 

The . The amount of tax will vary dependant on the internal decisions of each commune and the size and condition of each property.  Some regions are more expensive than others.amount payable is decided by the local authority of each region

 

Some local councils also make a separate charge for rubbish collection and sewerage charges, which are often sent out with the Taxe Fonciere bill.  However, this varies from council to council. Please note if you carry out major works you are required to advise the tax authority, who will then undertake a revaluation of the property.

 

The tax demand is usually sent out in September and is, unless you elect to pay on a monthly or on annual basis by direct debit. payable by mid-October

This is an .  If the property is your second/holiday home, even though you may not physically be resident on 1st January, the tax is still payable, provided the property is habitable. Your liability to the tax has nothing to do with the amount of time you actually spend at the property each year. annual habitation tax imposed on the occupier of the property on the 1 January of each year^st

 

If you let a property on a permanent basis the tax is payable by the tenant.  This is likely to be the case for our clients who rent their properties on long term lease agreements.

 

If you , you may be able to obtain an exemption from dedicate the property solely to the letting activity on short term rental agreements but with NO personal usageTaxe d’Habitation. Please contact our office if you need our assistance asking for the exemption.

The amount payable is decided by the local authority of each region. The amount of tax will vary dependant on the internal decisions of each commune and the size and condition of each property. Please note if you carry out major works you are required to advise the tax authority, who will then undertake a revaluation of the property.

 

If you also have a television then the and will appear on your TV licence will also be payableTaxe D’Habitation bill (see our Contribution à l’Audiovisuel Public section).

 

The tax demand is usually sent out in November and is (depending on the local council, and on whether this is a main residence or a holiday home), unless you choose to pay on a monthly or annual basis by direct debit.payable by mid-November or mid-December

 

 

If you have a you will be liable for the In 2021 the rate was 138 Euros.television at the French propertyTV license.

 

The TV licencewill automatically appear on your usuallyTaxe D’Habitation bill. The TV license would be payable once, even if your property is equipped with several televisions, or if you have several properties.

 

Unless you are exempted of Taxe d’Habitation on the basis that you dedicate your property to the holiday rentals and do not have access to the property for your private use, then the Contribution à l’Audiovisuel Public is .payable by the business on each television

 

A return will have to be submitted in April of each year with the corresponding payment.

Charles Hamer French Tax Services can assist. Please contact our office for more details.

 

Since 1st January 2018, wealth tax is payable by residents in France whenever the net value of relevant assets are worth over €1.3 million. Non-residents are liable only if they own French land and buildings valued over the same threshold. 

 

Before 2018, wealth tax was much greater in scope and looked at the total value of all assets, including property, savings and investments, cars and jewellery.

 

Although French wealth tax is triggered when the net value of property owned exceeds €1.3 million, it’s only the first €800,000 of the combined value of all of your property that’s tax-free. The current rates are as follows:

 

 

Fraction Taxable	Rate of Tax
€0 - €800,000	0%
€800,000 - €1,300,000	0.50%
€1,300,000 - €2,570,000	0.70%
€2,570,000 - €5,000,000	1%
€5,000,000 - €10,000,000	1.25%
€10,000,000+	1.50%

 

Special rules apply in arriving at the net value of a property when is charged with an