FRANCE Law and Practice Contributed by: Elodie Mulon, Jennifer Tervil, Romane Lemaitre and Emmanuelle Bonboire-Barthélémy, Chauveau Mulon & Associés
Property Tax and Rental Income Non-residents are liable for property tax on real estate they own in France, in accordance with ordinary law. Rental income derived from French-situated proper - ties is subject to French income tax (IR), and, since 2012, to social contributions at the applicable rate. Inheritance and DMTG In the absence of an applicable international tax treaty, the mere location of the property in France triggers liability for inheritance or DMTG, even if neither the donor/deceased nor the beneficiary/heir is tax resi - dent in France (Article 750 ter of the French Tax Code). Capital Gains Tax on Real Estate Capital gains realised by non-residents upon the sale of real estate located in France are subject to a with - holding tax at a flat rate of 19% for individuals, in addition to social contributions at a rate of 17.2%. Certain exemptions from the standard capital gains regime may apply to non-residents under specific conditions. • Full exemption for former main residence: full exemption may apply where the property sold was the seller’s former main residence in France, provided the property has remained at the seller’s free disposal (not rented or loaned) since their departure from France and the sale occurs no later than 31 December of the year following the transfer of tax residence outside France. The seller must be resident in an EU member state or a country having concluded an administrative assistance and mutual recovery agreement with France. • Partial exemption capped at EUR150,000: a partial exemption, up to a maximum of EUR150,000 of net capital gain, is available to non-resident individuals who are nationals of the EU or EEA and who were tax resident in France for at least two consecutive years at any time prior to the sale. The sale must occur within ten years of the transfer of tax resi - dence, or without time limitation if the property has remained at the seller’s free disposal since 1 Janu - ary of the year preceding the sale. This exemption is limited to a single property per taxpayer.
Furthermore, tax allowances ( abattements ) apply depending on the degree of kinship (Article 779 of the French Tax Code): • direct-line heirs (ascendants and descendants, including representation in cases of predecease or renunciation) benefit from an allowance of EUR100,000 per beneficiary; • in the collateral line: (a) transfers between siblings benefit from an allowance of EUR15,932; and (b) transfers to nephews and nieces benefit from an allowance of EUR7,967; • beneficiaries who are unable to work under normal conditions of profitability due to a physical or men - tal disability, whether congenital or acquired, are entitled to a special allowance of EUR159,325; and • in the absence of any other allowance, a residual allowance of EUR1,594 applies to each heir or legatee for successions opened since 1 January 2011. With respect to partition duties ( droits de partage ), the following are exempt: • the redemption of units in mutual funds and real estate investment funds ( fonds communs de place- ment , fonds de placement immobilier ) (Article 749 of the French Tax Code); • the division of jointly owned buildings ( copropriété ) and redistribution of common areas (Article 749 A); and • partition arising from the winding-up of a business (Article 749 B). 1.3 Income Tax Planning No content provided in this jurisdiction. 1.4 Taxation of Real Estate Owned by Non- Residents Non-residents holding real estate in France are sub - ject to various tax obligations, including property tax, inheritance and gift duties (DMTG), income tax and social contributions on rental income, as well as capi - tal gains tax on real estate disposals. These rules may be adjusted or supplemented by international tax trea - ties, particularly to avoid double taxation.
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