ON THE MONEY

It’s im­por­tant to fac­tor in the one-off and re­cur­ring ex­penses you’ll have to pay as you buy a prop­erty and set­tle in France, as Re­wan Treme­thick ex­plains

Living France - - Contents - Re­wan Treme­thick is a currency an­a­lyst at TorFX torfx.com

The one-off and re­cur­ring ex­penses you’ll need to fac­tor in when buy­ing a home in France

The UK tax year will soon be end­ing, and see­ing as it’s on ev­ery­one’s minds any­way, now seems a good time to ex­am­ine the kinds of taxes you will be li­able for as you move to France. Just as in the UK, there are quite a few to keep track of! We’ll also be ex­plor­ing some of the currency ser­vices you can take ad­van­tage of in order to help make your money go fur­ther.

Let’s start by look­ing at some of the big­gest costs you’ll come across when mov­ing abroad; namely the one-off and re­cur­ring ex­penses you’ll be li­able for as you buy a prop­erty and set­tle across the Chan­nel.

ES­TATE AGENT FEES

There is no con­sis­tent law in France re­gard­ing who pays the agent im­mo­bilier’s fees when buy­ing a prop­erty. It can be ei­ther the buyer or the seller. The es­tate agent works for the seller, en­ter­ing into a con­tract called the man­dat de vente. This spec­i­fies who pays the fees, but it is im­por­tant to note that this only ap­plies if you agree to it. The con­tract is be­tween the seller and the agent, so has no le­gal power over you. If you refuse, you will likely have to ne­go­ti­ate as the seller will want to mit­i­gate the ex­tra costs.

Es­tate agent fees are usu­ally be­tween 5 and 10% of the prop­erty’s val­u­a­tion and are li­able to TVA ( taxe sur la valeur ajoutée), the French name for VAT.

Ini­tially, the idea of hav­ing to pay the es­tate agent’s fees may seem un­ap­peal­ing, but it could be to your ad­van­tage. Sell­ers pay­ing the fees will in­crease the ask­ing price of their prop­erty to com­pen­sate for the ad­di­tional out­lay. This raises the no­taire’s fees due to be paid by the buyer, as th­ese are cal­cu­lated as a per­cent­age of the sale value of the prop­erty.

If you agree to pay the es­tate agent’s fees, make sure that th­ese are out­lined sep­a­rately in the con­tract from the cost of the prop­erty, to avoid th­ese be­ing taken into ac­count for tax cal­cu­la­tions.

NO­TAIRE’S FEES

Although of­ten re­ferred to as ‘ no­taire’s costs’, the money you pay to the no­taire is ac­tu­ally dis­trib­uted to sev­eral dif­fer­ent places. As well as the fees charged by the no­taire – which are be­tween 2.5 and 5% ex­clud­ing ad­di­tional costs – you will also have to pay them a fee for pre­par­ing the deeds to the prop­erty, mortgage fees, reg­is­tra­tion taxes and the nec­es­sary VAT on the pur­chase, among other costs.

In to­tal, 80% of the money paid to the no­taire is made up of taxes, which the no­taire then pays to the state on be­half of the client; 10% is used to cover ex­penses, such as draw­ing up doc­u­ments and car­ry­ing out sur­veys, with the fi­nal 10% re­mu­ner­at­ing the no­tar­ial ser­vice it­self; known as the émol­u­ments et hon­o­raires.

Fees paid to no­taires are held at the Caisse des Dépôts (De­posit and Con­sign­ment Of­fice) and are only re­leased once all for­mal­i­ties of the sale have been com­pleted.

In to­tal, no­taire’s fees can be equiv­a­lent to around 40% of the pur­chase price of a new-build prop­erty, or around 25% on a prop­erty that is more than five years old.

TAXE D’HABI­TA­TION

Un­for­tu­nately the taxes don’t stop once the prop­erty pur­chase has been com­pleted! Also known as the ‘oc­cu­pier’s tax’, the taxe d’habi­ta­tion is the French equiv­a­lent of the UK’s coun­cil tax. It is levied on ev­ery house­hold in France, re­gard­less of whether it is a main home or a sec­ond res­i­dence.

The per­son who oc­cu­pies the prop­erty on 1 Jan­uary – the start of the French tax year – must pay the taxe d’habi­ta­tion due, whether this is a ten­ant (pay­ing or oth­er­wise) or the owner. This does not nec­es­sar­ily mean you have to be present in the prop­erty on that day, just that you cur­rently have the right to oc­cupy the home and it is in suit­able con­di­tion to be oc­cu­pied.

Broadly speak­ing, the tax is cal­cu­lated by tak­ing the av­er­age rental cost in your area and mul­ti­ply­ing this by a per­cent­age set by your lo­cal com­mune (coun­cil). It is col­lected by the cen­tral gov­ern­ment, how­ever.

It is usu­ally paid as a lump sum by 15 No­vem­ber, although you can also pay it in monthly in­stal­ments. Be­cause you know the date that the tax is due to be paid, you can use a for­ward con­tract at an ear­lier point in the year when the mar­ket is in your favour to fix a strong GBP-EUR ex­change rate. This helps to ef­fec­tively re­duce the amount of tax you have to pay by se­cur­ing you more eu­ros for your pounds.

TAXE FON­CIÈRE

Also payable ev­ery year is the taxe fon­cière, or ‘fun­da­men­tal tax’, which is di­vided into two parts: tax on build­ings ( taxe fon­cière sur les pro­priétés bâties) and land ( taxe fon­cière sur les pro­priétés non bâties). This is paid by the owner of the prop­erty, ir­re­spec­tive of who oc­cu­pies it, and is also cal­cu­lated based upon the the­o­ret­i­cal rental value of your home, ad­justed for in­fla­tion. This is due on 15 Oc­to­ber and is paid in ar­rears, not in ad­vance.

The taxe fon­cière com­prises sev­eral ad­di­tional taxes and charges, in­clud­ing a charge for col­lec­tion of house­hold rub­bish ( taxe d’en­leve­ment des or­dures mé­nagères) for those com­munes where this ser­vice is pro­vided. The funds col­lected are split be­tween the com­mune, the group of com­munes that the com­mune be­longs to and the de­part­ment.

The oc­cu­pier is ob­li­gated to pay the tax for the full year, even if they sell their prop­erty dur­ing the year. Sell­ers in France there­fore of­ten stip­u­late in the con­tract that the buyer must share the tax bur­den with them.

Un­like the taxe d’habi­ta­tion, the taxe fon­cière is paid re­gard­less of whether or not you live in the prop­erty, have it as a sec­ond home, or rent it out per­ma­nently.

DO YOUR SUMS

Th­ese fees and taxes can add a lot to the to­tal cost of pur­chas­ing a French prop­erty, but know­ing about them in ad­vance means you won’t be in for any nasty sur­prises and that you can bud­get ac­cord­ingly. Con­sid­er­ing dif­fer­ent taxes are due at dif­fer­ent times of year – and you may be re­quired to pay them even if you haven’t been present in the coun­try much (or at all) – it’s even more im­por­tant to take your time and stay on top of your French tax re­quire­ments.

As well as plan­ning your fi­nances for the year, you can do the same with your currency trans­fers. Work out which out­go­ings re­quire a lump sum trans­fer and which will re­quire smaller, reg­u­lar trans­fers, and then use the va­ri­ety of trans­fer op­tions at your dis­posal to help make your money go fur­ther.

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