Buying a property in France – The legal process
The process is composed of two main phases
1. The Preliminary Sales Agreement (Contrat de reservation)
This is a binding agreement between the buyer and the seller (i.e the developer). This agreement can simply be signed through your agent, for instance Key To France.
2. The Title Deeds (Acte de vente)
The title deeds finalises the transaction between the buyer and the seller. The signing of the deed by both parties has to be witnessed by either the notaire in France or by a Notary Public in Ireland. Key to France has partnered with McKeever Rowan Solicitors in Dublin and a number of Notary Public all over Ireland to offer this option.
A period of approximately 3 to 9 months elapses between the first and the second phase.
The Notary Public
The notaire, unlike most European Solicitors/Lawyers, does not act for either the seller or the buyer. He is a public official who ensures that the transaction is carried out legally and accurately and gives the transaction incontestable validity.
The Notary Fees
For new properties these fees are between 2.5% and 3 % depending on the price of the property. Additional legal fees will apply if a French mortgage is used to finance the purchase.
French taxes that may apply when owning a property in France
1. Land & property tax (Taxe foncière)
This tax is applicable to the property owner whether the property is leased or not. This tax is determined in function of the area and the type of property (as an indication, a 35 Sqm 1-Bed. Apt. in Nantes is € 450 / year).
2. Local tax (Taxe d’habitation)
This tax is applicable to the people living in the apartment, whether they rent or own the property. For instance, in a leaseback situation, it is the leaser who will pay the tax and not the owner (as an indication, a 35 Sqm 1-Bed. Apt. in Nantes is € 450 / year).
3. Rental income tax (Impôt sur les revenus locatifs)
For non-residents this tax represents 25% of your net rental income. Your net rental income is calculated by subtracting all related charges from the gross rental income (mortgage interests, local and property tax, maintenances charges, etc.). With the leaseback programs, the addition of other incentives results, in most cases, in having no rental income tax to pay.
4. Capital Gains Tax (Impôt sur les plus-values)
From the 1st January 2004, Capital Gains Tax is reduced to 16% of the net gain generated by the sale of the property. After 5 years of ownership the taxable gain on the sale of the property decreases by 10% a year (i.e. no CGT is due after 15 years of ownership). Leaseback schemes with the LMP tax status are even more interesting as no CGT is due after 5 years of ownership.
Tax agreement between France & Ireland
A double taxation treaty between France and Ireland has been in force since March 1968. This convention was mainly drawn to avoid double taxation on income received in one country while being a taxed resident in the other. It covers all incomes including rental incomes.
Disclaimer
Tax law is complex and every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of French tax law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.
