Estimating French Property Purchase Ongoing Costs
After the purchase is complete you must face the ongoing costs of your French property purchase.
Insurance
All properties must be insured from the date of ownership, an ongoing cost which you cannot ignore.
The French standard practice, which many buyers find easiest on the day, is to take over the existing householder’s policy.
This may not be best for you: for example, not many people keep cash and jewellery in their holiday home, so you may be paying too much. If you would like a quotation before your renewal date and your policy documents in English, check our Property Insurance Rates.
Bank Account
By this time you must certainly have a French bank account. With many bills attracting penalties for late payment (majoration), setting up monthly direct debits can bring peace of mind. Bank charges are generally higher than you may be used to, but a cheque book, Eurozone debit card and regular statements are a good idea.
Taxe foncière (land tax)
The owner on the first day of January is liable for paying this tax, which is collected in the autumn.
Taxe d’habitation (local taxes)
Once the property is furnished and has water and electricity it becomes “habitable”, however infrequently it is used. The tax varies by location, the size of the property and its facilities. From 2005 television licence fees have been included in taxe d’habitation. The ongoing cost of property tax is beyond an owner’s control.
Charges de Copropriétaires (maintenance charges for ongoing costs in shared properties)
The maintenance of shared parts of a complex, such as an apartment block, is paid for by the Copropriété using funds raised from owners. Charges will vary according to the size and quality of the complex. It depends whether there are lifts, a caretaker, a swimming pool, shared gardens, secure parking, etc. You should consider the extent of these charges before signing the Compromis de Vente as they can be considerable for luxury blocks. Ask to see previous years’ accounts and minutes of residents’ meetings to check that all is in good order and that there is not a backlog of maintenance awaiting new owners.
Taxe de plus-values (capital gains tax).
There is no capital gains tax incurred if you sell your main home to buy another. Capital gains tax applies when you are selling a secondary residence within 30 years of purchase. The tax is applied to the difference between the sale price and the original purchase price. It takes into account any improvements for which you can produce valid receipts and of course the purchase and sale transaction costs. After a delayed start of 5 years, the tax allowance is 2% per year up to 17 years’ ownership, 4% up to 24 years, then 8%. The Notaire will calculate the tax due and take it out of the sale proceeds.
ISF (Impôt de solidarité sur la fortune)
ISF (wealth tax) is due from French residents with worldwide assets over €1,300,000 (2011 rate).
It is also due from non-residents whose net French property assets exceed €800,000. Because the balance of an outstanding is deducted from the property value for tax purposes you can minimise your ISF liability by buying your French property on a mortgage provided you are not French tax domicilled.
If you paid cash for your French property, it’s not too late to take a mortgage using either post purchase finance or Equity Release. Contact us to discuss either option and also how to use a French mortgage to reduce the Impact Of French Inheritance Tax.
