French Property Tax Guide for Expats: Essential Information for 2025

Investing in French property as an expat involves navigating a complex tax landscape. France imposes several property-related taxes that foreign owners must understand and comply with, whether you're purchasing a holiday home, investment property, or permanent residence. This comprehensive guide breaks down the essential French property taxes, exemptions, and strategies to optimize your tax position as a non-resident property owner.

The Main Property Taxes in France for Expats

Foreign property owners in France face several key taxes that differ significantly from systems in other countries.

Taxe Foncière (Property Tax)

Taxe Foncière is the primary annual property tax in France that applies to all property owners:

Who pays: The legal owner of the property on January 1st of each year
How it's calculated: Based on the property's "cadastral rental value" as determined by tax authorities
Rate variations: Rates vary significantly between municipalities (typically 2-3% of the property's cadastral value)
Payment deadline: Usually mid-October each year
Exemptions: New constructions may benefit from temporary exemptions (2-5 years)

For expatriates, this tax is unavoidable regardless of residency status. The tax bill is sent directly to your property address, so non-residents should arrange for mail forwarding or property management.

Taxe d'Habitation (Housing Tax)

Taxe d'Habitation is gradually being phased out for primary residences in France, but remains applicable for second homes:

Who pays: The person occupying the property on January 1st (owner or tenant)
Status for expats: Second homes owned by non-residents remain fully taxable
Premium areas: Properties in high-demand areas may face surcharges of 5-60%
Payment deadline: Typically mid-November to mid-December

In popular tourist areas, this tax can be substantial for non-resident owners who use properties as vacation homes.

IFI - Impôt sur la Fortune Immobilière (Property Wealth Tax)

IFI replaced the previous wealth tax (ISF) and specifically targets real estate assets:

Threshold: Applies when total worldwide property assets exceed €1.3 million
Progressive rates: From 0.5% to 1.5%
Calculation basis: For non-residents, only French properties are considered
Allowances: 30% reduction on the value of primary residences (rarely applies to expats)

For wealthy investors with substantial property portfolios, IFI can represent a significant annual expense.

Property Purchase Taxes and Fees

When buying property in France, expats should budget for substantial acquisition costs.

Stamp Duty and Registration Fees (Droits d'Enregistrement)

These transfer taxes represent the largest portion of purchase costs:

Standard rate: Approximately 5.8% of the purchase price
Composition: Includes departmental tax (4.5%), communal tax (1.2%), and administrative costs
Payment timing: Paid by the notaire on your behalf at completion

Notary Fees (Frais de Notaire)

Notaries are central to French property transactions:

Legal requirement: All property sales must be processed by a notaire
Fee structure: Approximately 0.8-1.5% of the purchase price
Total costs: When combined with stamp duty, total "notary fees" typically reach 7-8% of the property value

VAT on New Properties

For newly built properties, different tax rules apply:

Rate: 20% VAT instead of stamp duty
Developer properties: Usually incorporated into the advertised price
Self-builds: VAT may be recoverable under certain conditions

Capital Gains Tax for Non-Resident Property Owners

When selling a French property, expats face capital gains tax on any profit realized.

Standard Capital Gains Tax Rates

For non-resident sellers, tax rates include:

Base tax: 19% on the realized gain
Social charges: Additional 7.5% (reduced from 17.2% for EU/EEA residents)
Total standard rate: 26.5% for EU residents, 36.2% for non-EU residents

Taper Relief and Exemptions

Capital gains tax burden reduces over time:

Property ownership duration: Progressive reduction starting after 5 years
Complete exemption: After 22 years for base tax, 30 years for social charges
Primary residence exemption: Not typically available to non-residents

Special 2023-2025 Reliefs

The French government has introduced temporary measures to stimulate the property market:

Enhanced reductions: Additional relief for sales in certain urban renewal zones
Energy efficiency bonus: Tax reductions for properties with high energy ratings
Deadline: These incentives are currently set to expire in December 2025

Income Tax on Rental Properties

Many expat property owners generate rental income from their French real estate.

Furnished vs. Unfurnished Rentals

The tax treatment differs based on how you rent your property:

Unfurnished rentals: Taxed under the "revenus fonciers" regime
Furnished rentals: Considered as business income ("BIC" - Bénéfices Industriels et Commerciaux)
Tax rates: Progressive scale from 20-45% plus social charges

Micro-BIC and Micro-Foncier Simplified Regimes

For smaller rental incomes, simplified tax schemes are available:

Micro-BIC (furnished): 50% fixed expense allowance on gross income up to €77,700
Micro-Foncier (unfurnished): 30% fixed expense allowance on gross income up to €15,000
Benefits: No need to submit detailed expense accounts

Real Regime (Régime Réel)

For larger properties or substantial expenses:

Deductible costs: All actual expenses (management, insurance, repairs, loan interest)
Depreciation: For furnished rentals, property improvements can be depreciated
Requirement: More complex accounting but potentially more tax-efficient

Cautioneo offers customized rent guarantee insurance solutions for non-resident landlords that can protect you from rental income losses while providing tax-deductible expenses under the real regime.

Tax Reporting Obligations for Non-Residents

Owning French property creates specific declaration requirements.

Annual Tax Returns

Even if you have no taxable income in France:

Form 2042-NR: Required for all non-residents with French property
Filing deadline: Mid-May for paper returns, late May/early June for online submissions
Penalties: Significant fines for non-compliance

Tax Representative Requirement

For owners from certain countries:

Non-EU/EEA residents: May need to appoint an accredited tax representative
Role: Guarantees tax payment and handles communications with tax authorities
Cost: Typically 1% of the property value for sales transactions

Inheritance and Succession Planning

French inheritance laws and taxes present particular challenges for international property owners.

French Inheritance Tax Structure

The tax treatment depends on the relationship to the deceased:

Between spouses: Exempt from inheritance tax
Parent-child transfers: Allowance of €100,000 per child before progressive rates of 5-45%
Between siblings: 35-45% after a small allowance of €15,932
Distant relatives/non-relatives: Heavy taxation at 55-60%

EU Succession Regulation

Important protection for international owners:

Law choice: Option to elect your national law to govern succession
Documentation: Must be explicitly stated in your will
Benefits: Can override French forced heirship rules

Tax Planning Strategies for Expat Property Owners

Several approaches can help optimize your tax position as a non-resident property owner.

Corporate Ownership Structures

Careful consideration is required:

SCI (Société Civile Immobilière): French property holding company
Benefits: Simplified succession, potential tax advantages for certain situations
Drawbacks: Annual filing requirements, potential "substance" issues in some cases

Mortgage Financing Strategy

Strategic use of loans can be tax-efficient:

Interest deductibility: Mortgage interest is generally deductible from rental income
Wealth tax impact: Debts reduce the taxable base for IFI
Non-resident mortgages: Available from French and international banks, though terms may differ from resident loans

Timing Property Sales

Capital gains considerations:

Holding period: Significant tax reductions after 5+ years of ownership
Market timing: Balancing market conditions with tax optimization
Reinvestment options: Potential to reinvest proceeds in other French property

FAQ - French Property Taxes for Expats

Do non-residents pay more property tax in France than residents?

No, the basic property taxes (Taxe Foncière and Taxe d'Habitation) are calculated identically for residents and non-residents. However, non-residents may face higher income tax rates on rental income (minimum 20% vs. potentially lower rates for residents) and don't benefit from certain tax credits available to residents. Additionally, properties classified as second homes (which most non-resident properties are) remain subject to Taxe d'Habitation even as this tax is being phased out for primary residences.

Can I avoid French wealth tax (IFI) as a non-resident property owner?

As a non-resident, you're only subject to IFI on your French properties, not worldwide assets. However, if your French property portfolio exceeds €1.3 million, there's no complete exemption available. Strategies to minimize IFI include: maintaining mortgage debt (deductible from the taxable base), investing through certain company structures (though these have their own complexities), or dividing ownership among family members. Each approach has legal implications and should be considered with professional advice.

What happens if I don't pay my French property taxes as a non-resident?

Failing to pay French property taxes has serious consequences regardless of residency status. The French tax authorities can place liens on your property, levy penalties and interest (up to 10% initial penalty plus monthly interest), and ultimately force the sale of your property to recover unpaid taxes. Additionally, unpaid taxes can prevent you from selling or refinancing your property voluntarily, as all tax debts must be settled before a notaire will complete any property transaction.

Do I need to file a French tax return if my property is not rented out?

Yes, non-residents who own French property generally need to file an annual tax return even if the property generates no income. This requirement applies whether the property is vacant, used personally, or loaned to friends/family without rent. The filing establishes your tax status and property ownership. Additionally, if your property's value exceeds €1.3 million, you'll need to file for IFI (wealth tax) purposes. Non-compliance can result in penalties starting at €150 and potentially higher amounts for larger properties.

Can I recover VAT paid on a new property purchase in France?

VAT recovery on new property purchases (20% rate) is possible in specific circumstances for non-residents, but requires meeting strict conditions. To qualify, you must operate the property as a commercial furnished rental with provision of at least three of the following services: breakfast, regular cleaning, linen provision, and guest reception. The property must be registered as a commercial operation, and you'll need to register for VAT and charge VAT on your rental income. This creates significant administrative requirements but can represent substantial savings on the initial purchase.