Over the past several months, we have noticed that many more French property owners have been contacted by the French tax office local to the property that they have purchased in a number of different areas. It would appear that local French tax offices are becoming much more proactive in relation to checking the tax position of foreign French property owners.

One particular type of local tax, the ‘Taxe d'habitation’ Occupier’s tax), appears now to be routinely the object of verification by the sending out of a standardised form to the new owners. This form requests information upon whether the property is furnished, vacant or occupied, and also whether it is the primary or secondary residence of the owners. The referral date for this local tax is 1st January of each year. If a property is rented out on this date, the occupier (i.e. the tenant) is liable to pay it. If it is not rented out, the owner is liable to pay it regardless of the fact that it is a second home, provided that it is furnished. If the property is empty of furniture, it is not subject to this tax.

In addition, a number of people have been contacted in relation to income tax, asking for confirmation of the individual's income tax position, e.g. whether they are resident in France, and, if not, in some cases to provide proof that income tax is being paid in the country of residence.

These increasing verifications also concern those who purchase property using French property holding vehicles known as SCIs (‘Sociétés Civiles Immobilières’). Upon the registration of these companies, some local tax offices are asking for information pertaining to the income stream and tax position of the company, as well as reminding the shareholders of their taxation obligations. With this extra attentiveness of local tax offices to foreigners who purchase French real estate property, it is as important as ever for French property owners to ensure that they comply with their French tax obligations. The main obligations relate to:

• Declaring French source income, e.g. from lettings, and paying French tax on it;

• Making French tax income tax returns an• paying French tax for those who are French tax resident or who are otherwise to be viewed as taxable in France (e.g. centre of vital economic interests in France despite being present for fewer than 183 days per annum e.t.c.);

• Declaring the shareholders of non-resident French property holding companies or those of foreign companies owning French real property.

The consequences for not complying with French tax obligations include penalties, back taxation and interest. Also, there are other consequences which are less readily apparent, such as not being able to claim the exoneration from capital gains tax liability on the basis of principal residence for those who are living in France but do not make income tax returns. Despite the local tax offices being more proactive, it is crucial that French property owners inform themselves of their obligations and the deadlines, particularly in relation to matters such as income tax where the first return is not automatically sent out.

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Published with the kind permission of Headdon Consulting

© Headdon Consulting

Headdon Consulting Sarl
Le Moulié, 32190 Rozès (Gers), France
Tel: 0033-(0)5-62.68.00.81
Fax: 0033-(0)5-62.68.01.49

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