You wish to purchase a holiday home in France but are concerned by the tax costs of the property
You are required to pay the taxes related to the possession of the property: land tax (taxe foncière), property tax (taxe d’habitation), but most of all the wealth tax if your property is valued at more than 760,000 €.
This tax, which is calculated each year, is based on the totality of the value of your physical wealth (real-estate and furnishings) possessed in France.
Table of Wealth tax rates
from 0 to 760 000 €………………….0 % (0 euros)
from 760,001 € to 1,220,000 €………0,55% (0 to 2530 euros)
from 1,220,001€ to 2,420,000 €……..0,75% (2530 to 11530 euros)
from 2,420,001 € to 3,800,000 €…….1 % (11530 to 25330 euros)
from 3,800,001 to 7,270,000 €………1,30% (25330 to 70440 euros)
from 7,270 001 to 15,810,000 €………1,65% (70440 to 211350 euros)
from 15,810,001 € and up ……………1.80% (> 211350 euros)
For a house valued at 4,000,000 €, you are required to pay 27,930 € per year
To reduce the wealth tax, you could:
Example:
Purchase: 4,000,000 €
Charges 6%: 240,000 €
___________
Total cost: 4,240,000 €
Personal contributions of 15%: 636,000 €
Loan 3 604 000 €
Wealth tax amount: 636 000 – 240 000 = 396,000 €
If the prices of the real-estate increase at a rate of 4,9% each year, as has been the case during the past 40 years, you would be required to pay the ISF wealth tax during the third year. During that third year, you will have a total savings of 27,700 € (27,930 € - 207 €). This loan on the total value of the house will be backed up by an asset you possess abroad: stocks, real estate etc.
A21:This house could be bought by yourself and your three children of legal age.
In this case, the base of the wealth tax will be 4,000,000 € for 4 individuals= 1,000,000 € per person.
You will have to pay:
from 0 to 760,000 € = 0 €
from 760,000 € to 1,000,000 € = 240,000 € to 0.55% = 1320 x 4 = 5280 €
In this case you total savings will be 22,650 €
A22:This property will be bought by a company (that will be under your control) and your three children will be associates/owners without the capacity of decision making.
In this case, you may buy the property through a corporation that is not subjected to the corporation taxes, such as the “SCI”,the “ SARL” or “EURL”. While the fiscal advantage will be the same, you maintain control of the corporation and thus the real estate.
You have bought a house with your wife, each parent are allowed to give each child 150,000 €. For example, if you are married, you could donate 300,000 € to each child. If you have 3 children: 900,000 € every six years without paying inheritance fees. You thus reduce your Wealth Tax by 9,600 € per year ((200,000 x 1.30%) + (700,000 x 1%)).
Your company can directly buy the property for the reception of your clients or suppliers, this property will be reserved for professional use. Your company can participate as an associate in the creation of the corporation in France that purchases the property such as a Real Estate company-"SCI".
When you leave the management of the company, you could re-purchase the shares of the company, but from this moment you would be required to pay the Wealth Tax.
Your property could be rented out in your absence. If the income rent is superior to 23,000 € per year, you would be considered a professional renter. If you are retired, it would be your only professional activity and you would be exonerated of the Wealth Tax. Your other pensions, stocks and dividends not taken into account, the income from your professional activity must represent more than 50% of your other revenues of activity, and your fiscal residence would be in France.
In order of benefit from the “bouclier fiscal” of 50% of revenues, you could transmit your life-interest (usufruit) of property to a person with little resources.
- In order to financially help your child through his studies, during the duration of his studies, temporarily give him the life-interest (usufruit) of the property if the property delivers revenue (examples: farmland, rent etc)
- You could financially support your elderly parents whose revenue is low. This situation presents low tax risk.
- For temporary donations of the life-interest (usufruit) for foundations of general interest, the donation must be carried out by a notary for a minimum period of 3 years.
| Wealth Tax Calculations | |||||
| Property Value | Amount Subjected to The Wealth Tax | Wealth Tax total | |||
| 1st year | 4 000 000 | 4 000 000 | 27 930 | ||
| 2nd year | 4 196 000 | 4 196 000 | 30 478 | ||
| 3rd year | 4 401 604 | 4 401 604 | 33 151 | ||
| A1 - With a loan | |||||
| Loan amount : | 3 604 000 | ||||
| Property Value | Amount Subjected to The Wealth Tax | Wealth Tax total | Wealth Tax savings amount | ||
| 1st year | 4 000 000 | 396 000 | 0 | 27 930 | |
| 2nd year | 4 196 000 | 592 000 | 0 | 30 478 | |
| 3rd year | 4 401 604 | 797 604 | 207 | 32 944 | |
| A2 - Purchase a property in the name of several individuals | |||||
| Number of individuals : | 4 | ||||
| Property Value : | 4 000 000 | ||||
| Part per individual : | 1000000 | ||||
| Property Value | Amount Subjected to The Wealth Tax | Wealth Tax total | Wealth tax to pay on the totality of the property | Wealth Tax savings amount | |
| 1st year | 4 000 000 | 1 000 000 | 1 320 | 5 280 | 22 650 |
| 2nd year | 4 196 000 | 1 049 000 | 1 590 | 6 358 | 24 120 |
| 3rd year | 4 401 604 | 1 100 401 | 1 872 | 7 489 | 25 662 |
| A3 - Shared donation between children | |||||
| Donation to children : | 900 000 | ||||
| Property Value | Amount Subjected to The Wealth Tax | Wealth Tax total | Wealth Tax savings amount | ||
| 1st year | 4 000 000 | 3 100 000 | 18 330 | 9 600 | |
| 2nd year | 4 196 000 | 3 296 000 | 20 290 | 10 188 | |
| 3rd year | 4 401 604 | 3 501 604 | 22 346 | 10 805 | |