These pages answer some frequently asked questions about buying French property as an investment. Please read our disclaimer. Please feel free to raise any interesting points you may have. Just Contact Us. This is not an advisory service but we are happy to informally exchange views on interesting points raised. Just click here.

Frequently Asked Questions - 7

  • Are there any other French taxes to pay?

    Yes. French income tax is not the only tax charge applicable to French rental income. Some rentals may be subject to TVA (at a reduced rate of 5.5%) and exempt TVA rental income in excess (currently) of FRF 12,000 per annum is usually liable to a local tax on leases called droit de bail at a rate of 2.5% and an additional tax of 2.5% if the property is over 15 years old.

    Since 1999 the droit de bail has not applied where the gross rental income is under FRF 36,000. The charge was abolished as of 1 January 2001. The additional contribution of 2.5% does, however, remain applicable.

    The supply of food, telephone and other services is subject to TVA at the standard rate of 19.6%. Where an establishment provides accommodation on a full board or half-board basis, the reduced rate of TVA may apply to three-quarters of the total amount charged.

    Businesses whose annual turnover is below (currently) FRF 500,000 may trade outside the scope of TVA. Small businesses which exceed the above turnover limits may still benefit from a simplified TVA regime, as long as their turnover does not exceed FRF 5 million. The simplified TVA regime allows these businesses to make one annual TVA return as opposed to one every month.

    A business registered for TVA will be in a position to receive, where appropriate, refunds of TVA paid for the running of the lets and any renovations of the letting units. Nevertheless, any payment of this tax cannot be reclaimed if the business was not registered for TVA at the time the liability was incurred.

    Tax-planning advice should also be sought to cover possible French wealth tax and French inheritance tax liabilities.

  • Can I get a mortgage?

    Generally yes, although some lenders will not lend you money to buy a 'leaseback' property. Most lenders are happy if you let French property for short-term holiday lets or for longer periods, but you will need to obtain written permission from the lenders before you do. Please click here or contact us for further information.

    We also recommend that you buy a copy of Letting French Property Successfully (please click here) which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.

  • Can you find investment property for me in France?

    Yes, anywhere in France. Please click here for further information, or contact us.

    We also recommend that you buy a copy of Letting French Property Successfully which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.

  • How do I manage the property?

    To manage the property yourself you should ideally live in or close by. However, because of the cost of advertising and the trouble and expense of finding tenants, employing local cleaners and gardeners, it is often easier to instruct a local French letting agency (agence locataire) to market and manage your property. Management fees for these and other services typically range from between 10 to 25 per cent of rental income. Your rights and obligations and the duties of the letting agent should be clearly defined in a written mandat de gestion. We can help you find a reputable managing agent anywhere in France. Just contact us for further information.

    We also recommend that you buy a copy of Letting French Property Successfully (please click here) which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.

  • How long must I keep the property?

    You can sell the property at any time. But beware French capital gains tax which may have an adversely impact if you sell within two years of acquisition, or if you speculate in French property.

  • How many weeks can I expect to rent my property?

    Depending on the location of your property, and marketing efficiency, you can usually let for between 45 weeks (e.g. Côte d'Azur) to 12 weeks (e.g. isolated parts of central France) each year.

    We recommend that you buy a copy of Letting French Property Successfully which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.

  • Should I buy French property as an investment?

    In recent years, thousands of British families or groups of friends have bought a property in France to escape from cold winters and wet summers. For many, their personal use of the property is a source of considerable pleasure. Although by UK standards property price in France are still generally low, and purchase loans are readily available, many potential buyers are discouraged from purchasing French property for two main reasons.

    First, they do not want to feel tied down to the same property each year when there are other countries or parts of France to explore. Secondly, their available holiday time is limited to two or three weeks in the summer and, although friends and relatives may occasionally visit the property, it will otherwise remain unoccupied for the rest of the year.

    Investing in French property will give all the chances for profit - or loss - of investing in financial assets, and may give you the added benefit of leisure use, as well as generating rental income and a possible capital profit as well. But remember that any such investment will bring with it the added disadvantage of comparative illiquidity, and the need for continuing maintenance, either by you or an agent.

    Please however take heed of the following main guidelines. First, don't commit yourself to anything while you're abroad. The methods and cost of purchase will be different from those in your home country. Be especially wary of timeshares. High pressure selling to vulnerable holidaymakers has been developed into a fine art form. Don't sign anything or pay any money until you've had time to consider carefully what you're being offered. Owning an investment property in France will almost always bring additional tax liabilities. To buy in France you will always need the help of a lawyer who is expert in French law and the law of your home country. It will be a rare coincidence if your holiday inclinations coincide with good investment opportunities. Always bear in mind the exchange rate risk, particularly if you are buying with borrowed funds. Always take competent professional advice.

    We recommend that you buy a copy of '3')) . "'>Letting French Property Successfully which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.

  • What about capital gains tax?

    We hope you have many years of happiness from your French property before the time comes to sell it. That time will eventually arrive, though. And that's when capital gains tax kicks in.

    Non-residents selling French property often believe incorrectly that any gain in the value of the property needs to be declared and taxed in their country of residence. In fact, the French tax authorities will want 33.33 per cent of any gains realised by non-residents on the sale of French property. If the French tax authorities believe that your acquisition of French property was business or profit motivated, the rate of tax increases to 50 per cent.

    In France, there are two ways of arriving at the net taxable gain depending on whether the vendor is an individual or a commercial company. If the property is owned by an TVA (a French property-holding company) the capital gains tax treatment will depend on whether the TVA is subject to French income tax or French corporation tax. In the latter case, it will be classed as a commercial company and subject to French business capital gains tax.

    Capital gains in the hands of individuals or TVA's subject to French income tax are determined as the difference between the sale price and the base cost, which is indexed for inflation. The base cost includes the purchase price and expenses, plus any major restoration work (but not painting, decorating or other embellishments). The difference, i.e. the gross gain, is then reduced by 5 per cent per year of ownership beyond the second. In other words if an individual has owned the property for over 22 years the gain is totally cancelled.

    The 5 per cent reduction is granted for each full year of ownership (beyond the second) from the exact date of purchase. For instance, the full period of ownership of a property bought on 15 May 1990 and sold in March 2000 will be 9 years. If the property was sold after 15 May 2000 the vendor would gain an extra year and thus a further 5 per cent reduction.

    The gross gain is further reduced by a general annual abatement of FrF 6,000 and, if it is their first sale of a secondary home in France, the vendors may apply an abatement of FrF 40,000 (for a married couple) or FrF 30,000 for a single person, plus FrF 10,000 per child (whether dependent or not). For this, they must have had the use of the property (i.e. not rented) for a five-year period, which need not be consecutive from the date of acquisition.

    The business capital gains regime is not so generous, as the base cost is reduced by a 2 per cent depreciation on the buildings per year of ownership, thereby inflating the gain. Furthermore, no indexation or other abatements are applicable. This method applies, for instance, to foreign limited companies owning French property, but also to any TVA liable to French corporation tax (usually when they have rented the property out on a furnished basis) although there are ways round this problem. It also applies where an individual has registered the property as a business asset, used for instance for seasonal lettings. In this case, the taxpayer has benefited from depreciation for the purposes of French income tax on the rental income.

    However, there is an exemption from French capital gains tax for small businesses, but the following conditions must be fulfilled: the activity has been running for at least five years at the time of the property disposal; and the annual turnover does not exceed FrF 1m.

    Non-residents may be asked to appoint a fiscal representative whose responsibility is to calculate and to collect the French capital gains tax. The person or business acting as a fiscal representative undergoes a \"tax audit\" to gain the French tax authorities' approval.

    The fiscal representative is responsible for the payment of French capital gains tax if the liable taxpayer they are acting for fails to pay this. For this reason it is very rare to find a person who readily accepts this role and non-residents are left with no choice but to appoint a professional firm to act as fiscal representative. These normally charge a fee of 1 per cent of the sale price, deductible from the taxable gain. The service they offer for this fee includes advice and calculation relating to the computation of the taxable gain, the preparation of the relevant returns, and representation of the taxpayer in case of conflict with the French tax authorities.

    The fiscal representative will scrutinise each invoice claimed for deduction in respect of renovation, property improvements and so on. To be allowable, the French tax authorities will usually require sight of all original TVA receipted invoices (copy invoice, receipted estimates or 'back of an envelope' type invoices are normally unacceptable). If you have used British or other non-French contractors, the French tax authorities will usually only allow their charges as an allowable deduction if their invoices expressly state that they relate to your French property.

    Taxpayers who have not kept any evidence of renovation work may deduct a notional amount of 15 per cent of the acquisition price. This notional deduction is subject to evidence that work has effectively been carried out and may require the certificate of an expert. If the taxpayer has done the work himself and has kept all invoices for material and equipment, the deduction can be fixed as the total invoices multiplied by three to reflect the work done.

    If they feel that the deduction of some invoices may be questionable, but deduct them anyway, the fiscal representative will retain a sum as surety to cover the risk of reassessment. The latter runs for a four-year period after the filing of the French capital gains tax return.

    Where there is a capital loss or the gain is low, the notaire will normally apply for a dispensation from fiscal representation.

    British resident must also report their sale of French property to the Inland Revenue. The French tax authorities are likely to pass on to the Inland Revenue any information they have about your French affairs to include copies of your French bank account statements and any capital or interest credited to you. The Inland Revenue also has the right to see all correspondence leading to the sale of your French property.

    Under the Anglo-French Double Tax Treaty any liability for French capital gains tax should be wholly or partially offset by way of credit relief against any UK capital gains tax.

  • What about French income tax?

    Income generated from French lettings is frequently not declared to the French tax authorities. Many UK residents have wrongly been led to believe that the reporting of their French rental income to the UK Inland Revenue is sufficient and absolves them from any need to declare the rent to the French authorities.

    But under Article 5 of the 1968 France-UK double tax treaty France has the principal right to tax French rental income. The French tax paid is then set aside against any UK tax liability arising from the same source. Rental income is always French-source income if it relates to a property in France. It does not matter if both landlord and tenant reside in the UK or where the rent is paid or what currency the rent is paid in.

    The widespread failure of UK lessors to declare their French rental income in France has to date been encouraged by the apparent nonchalance of the French tax authorities. But it now seems that the latter are becoming more efficient at collecting tax from UK and other foreign landlords.

    The French tax authorities may tax up to three years in arrears and usually add interest and penalty charges on late tax returns.

    Rental income profits (or losses) must be reported on the normal French income tax return (Cerfa 2042) and submitted to the Centre des Impôts des Non-Résidents (Paris) before 30 April each year following the French tax year end of 31 December.

    Calculation of the net taxable income varies depending on whether the letting is furnished or unfurnished. Furnished lettings qualify as a business for the purposes of French taxation.

    The method used to determine the taxable income varies depending on the level of annual turnover from the preceding year. Where this does not exceed (currently) FRF 500,000 income tax is calculated on 30% of the rent. The abatement of 70% is supposed to cover all expenses. If the turnover exceeds FRF 500,000 the \"simplified real\" regime or \"normal real\" regime applies. The normal regime requires the preparation of detailed accounts and involves compliance formalities similar to a company liable to French corporation tax. The simplified version, allowed where turnover does not exceed FRF 5 million, follows the same rules but the level of formality is reduced.

    Taxpayers can opt out of the regime prescribed by law and choose a more formal one. Elections must be sent in writing to the tax office. The implications of a change of tax regime must be carefully weighed, as in many cases the option used is irrevocable.

  • What is a ‘leaseback property?

    A leaseback (nouvelle propriété) exists when you buy the freehold of a new or totally rebuilt property in a classified tourist residence in France, and immediately lease it back to the developer's onsite management company ('your head tenant') for a fixed period of between 9 to 11 years. Your head tenant then sub-lets the property to tourists throughout the year in return for which you receive a significant French VAT ('TVA') discount off the purchase price.

    For example, a leaseback property in Nice is listed at £100,000. The net price you in fact pay is about £80,000 after deducting TVA of 19.6%. Add to this French legal fees of about 3% of the net purchase price. your total investment amounts to about £82,500. If you require a mortgage, funding of up to £76,000 (95% ) can be obtained. If you take out a 20 year mortgage at about 4.2% fixed rate or 3.8% at variable rate, your monthly repayments will be about £450. These payments can be covered by a guaranteed income from your head tenant of about £4,000 each year.

    For a capital outlay of about £15,000 you could put together an attractive investment portfolio with other properties in Paris, the Alps etc costing about £250,000. With property prices increasing in France, after 9 years you could multiply your return by owning three properties worth a total of £500,000.

    We have at present leaseback properties available in many parts of France where there is likely to be considerable property appreciation over the next 9 years. This includes Paris, the French Alps and Côte d'Azur, Normandy, Brittany and Charente. Please contact us for further information.

    Do not however sign anything until you have taken competent independent legal advice. For example, the French wording of your lease (not an English-language translation which is often wrong) should be carefully checked to ensure that:

    • It fully complies with the requirements of Décret 53-960 of 30 September1953 ('the 1953 Law').
    • You also get a guaranteed fixed rental income (typically around 4.5%) index-linked payable in arrears net of French income tax and TVA.
    • You can either occupy the property yourself free of charge (typically for a period of between 1 and 6 weeks each year spread over high, mid and low seasons, (renting any additional necessary time back from your head tenant); or allow others to occupy the property in your place; or surrender your right of occupation in return for a higher payment from your head tenant.
    • Throughout the term of the lease your head tenant will pay all the rates (except taxe foncière which you must usually pay yourself) water, electricity and service charges, and the costs of insurance, maintenance, repairs and (if it belongs to you) furniture replacement.
    • Your head tenant will return the property to you in good condition when the lease expires.
    • When the lease expires the property is yours to do as you please, and your head tenant cannot claim financial compensation from you.

    If you decide to terminate the lease and keep the property for personal use before the 9 years is up you must repay TVA on a pro rata basis. Leaseback owners in a development which loses its tourism classification (regulated by an Arrêté of 14 February 1986) may also have to reimburse some or all of the TVA they avoided on purchase.

  • What makes a suitable investment property?

    As a general rule, if you are looking for capital growth from your investment, avoid small and cheaper properties. If you are looking for high income returns, avoid large and expensive properties. If you are looking for a combination of both, a two bedroom apartment in a copropriété is usually a safe bet.

    Regular lettings (locations) are only likely if the property is in a good location, well maintained, furnished and equipped, and within fairly easy reach of shops, restaurants and other tourist attractions. For example, golf draws visitors all year round. France is the most popular country with British holiday skiers, boarders and mountain walkers. Alpine property is one of the hottest investments in France. If you are buying for the rental market then above all else you must by as close to the slopes as possible. Many buyers who invest close to the ski slopes earn high returns from letting their chalet or apartment throughout the year. All the major resorts are an easy day=s drive from the Channel ports along French motorways that are generally deserted in winter. The most famous alpine ski resorts - such as Val d`Isère, Courchevel 1850, Méribel, Les 2 Alpes, Chamonix, Megève, Alpe d=Huez, Tignes or Val Thorens - can all be reached from Lyon-Satolas airport by bus (chartered by tour operators or regular coach service), taxi or car very easily and quickly.

    We recommend that you buy a copy of Letting French Property Successfully which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.

  • What makes the investment so attractive?

    More than 60m tourists visit France each year. This is not a passing phenomenon, and with new, improved and cheaper transport links, the demand for self-catering accommodation in France continues to grow from foreign holidaymakers, especially in Britain and northern Europe.

    The rent you charge might not only cover annual maintenance and other expenses, but also leave you with surplus income to pay for your own holiday. You can expect an annual net income of about 7.5 per cent of the value of most properties in France. With careful planning, more systematic lettings could also earn you enough to recover your initial capital outlay and borrowings. You may even decide to buy more property to let as a business!

    Currently, the value of a well-located French property in a popular area should also grow by between 10 and 15 per cent each year.

    We recommend that you buy a copy of Letting French Property Successfully which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.

  • Where can I get more information about the pro’s and con’s of investing in French property?

    In the first instance, please contact us. We also recommend that you buy a copy of \"Letting French Property Successfully\" (please click here) which has had excellent reviews. This book is a very good starting point for anyone looking to gain familiarity with most of the issues, questions to ask and decisions to take when acquiring French property as an investment. The authors have covered each stage of the French property experience from choosing the property through to purchase - financing, how to own, and the legal process itself - on to landlord and tenant issues. There is a readable explanation of French succession law and matters relating to wills. As well as providing input to strategic decisions there is a wealth of detailed support material covering such matters as the risks of unintended agricultural tenancies, licensing in relation to alcohol, and a comprehensive French-English glossary of terms. There is also a series of precedents and a comprehensive chapter dedicated to the taxation of rental income, in both France and the UK, for both individual and corporate owners.