DIRECT PURCHASE OF REAL ESTATE
This section discusses the tax implications of the direct purchase of real estate. First is discussed the impact for resident individuals and non-resident individuals. Thereafter is discussed the impact for resident companies and non-resident companies.
Acquisition of real estate triggers transfer tax which is due by the purchaser. The stipulated price is subject to transfer tax at a rate of 6% - 7.5% collected by a French notary.
The supply of real estate is not subject to VAT for the purchase of real estate between individuals (only transfer tax). If VAT applies, no transfer tax is due. VAT can only apply if the vendor is subject to VAT.
The sale of a building land is subject to VAT if the vendor is a professional subject to VAT (rate 20% at the expense of the buyer). The sale of a new real estate (within 5 years of its creation) by a professional vendor is subject to VAT (20%). It is possible for a person subject to VAT to opt for the application of VAT, if it is not applicable by default.
Same treatment as residents. The nomination of a tax representative in France is only necessary when selling the real estate or the shares, not when buying them.
The acquisition and transfer of French real estate is subject to transfer taxes. The market value of the immovable property will be subject to a tax rate of 5.09% in most situations. This rate could be adjusted by departmental advisors. The transfer tax is payable by the purchaser and is not deductible as business costs, it constitutes depreciable acquisition costs.
Value added tax
The supply and lease of real estate are exempted from VAT unless a building is sold within five years after its built. The applicable VAT rate is 20%. However, when the operation is exempted it stays possible to opt for a VAT taxation under conditions. In this case, the input VAT would be deductible.
Non-resident companies are treated in the same manner as resident companies for the income generated from immovables property located and taxable in France. The non-resident company is therefore liable to tax in France with the income generated in France only.
Indirect purchase of real EstatE
This section discusses the tax implications of the indirect (shares) purchase of real estate. First is discussed the impact for resident individuals and non-resident individuals. Thereafter is discussed the impact for resident companies and non-resident companies.
Transfer tax is due on the sale of shares. Rate are 0.1% to 5%.
Same treatment as for individuals.
The transfer of shares in a non-listed real estate company is subject to transfer taxes at a rate of 5%.
A company qualifies as a “real estate company” if its gross assets is composed of 50% or more of immovable property (or property rights) located in France.
Non-resident companies are treated in the same manner as resident companies.