Legal and Tax Consequences of Acquiring Real Estate in France in One’s Own Name as a Non-Resident
The acquisition of real estate in France by a non-resident in their own name raises several legal and tax implications that must be carefully considered.
1. Ownership Rights and Legal Framework
As a non-resident, you are allowed to acquire real estate in France without any particular restriction. However, purchasing property in your own name means that the asset is directly integrated into your personal estate, which may have consequences under both civil law (succession, matrimonial property regime) and tax law.
2. Taxes Applicable at the Time of Acquisition
Purchasing real estate in France entails the payment of registration duties (transfer taxes) or VAT, depending on whether the property is new or existing. These costs are identical to those paid by French residents.
These taxes are paid exclusively through the notary, who holds the legal monopoly in France for conducting real estate transactions.
If you work with a real estate agent, they may also charge a commission. This commission is usually paid along with the purchase price through the notary’s office handling the transaction.
3. Source of Funds
Notaries may request proof of the origin of the funds used for the purchase. You are not permitted to pay the purchase price in cash.
4. Taxation of Rental Income
If the property is rented out, the rental income is taxable in France, even if you reside abroad. You will be subject to French income tax as well as social contributions. However, double taxation treaties may help avoid being taxed twice on the same income.
- If you are a resident of an EU country: income tax is levied at a flat rate of 20% to 30%, plus 7.5% in social contributions. Thus, the effective tax rate is generally around 27.5%.
- If you are a non-EU resident: the same flat income tax rate applies (20% to 30%), but social contributions rise to 17.2%, resulting in an effective tax rate of approximately 37.2%.
5. Property Tax and Residence Tax
You will be liable for property tax (taxe foncière) and, in some cases, residence tax (taxe d’habitation), particularly if the property is furnished and available for your own use.
6. Real Estate Wealth Tax (IFI)
Non-residents are also subject to the French Real Estate Wealth Tax (Impôt sur la Fortune Immobilière – IFI) if the net value of their real estate holdings located in France exceeds €1,300,000. Only properties located in France are considered for this threshold.
If you purchase the property using a mortgage, the amount of the loan (under certain conditions) may be deducted from the property’s net value when calculating IFI liability.
7. Inheritance and Succession
In the event of death, any real estate located in France will fall under French inheritance law, unless a contrary provision is made through a valid choice of applicable law. Inheritance tax will be payable in France, and the applicable rate depends on the relationship between the deceased and the heir(s).
8. Conflict of Laws Risks
Acquiring real estate in your own name may give rise to conflicts of laws, particularly regarding matrimonial regimes or inheritance matters between French law and the laws of your country of residence. Appropriate estate planning is therefore strongly recommended.
9. Short-Term Rental Authorization
If you intend to rent the property on a short-term basis (e.g., via Airbnb, Booking.com), it is essential to check before purchasing whether such rentals are authorized by both the local municipality and the co-ownership regulations.
Some municipalities restrict short-term tourist rentals to specific zones, and some condominiums prohibit them altogether.
For any further questions regarding real estate acquisition, rental, or any other matter related to property ownership in France, please feel free to contact our firm. We are here to support you throughout your project.
