Non-French company – French real estate & French taxes – Mind the trap!
Our clients often plan to purchase their French property using their business company in the UK or other countries…If we generally manage to satisfy this expectation we need to outline the tax implications for any non-French companies investing in real estate in France. Key points include:
1. Mind the annual 3% Tax!:
Legal entities, both French and foreign, owning real estate in France as of January 1st are subject to an annual 3% tax based on market value. There are exceptions to avoid this tax, including for international organizations, entities with less than 50% of their assets in France, or those based in the EU or countries with an administrative assistance agreement with France for tax evasion prevention. In practice a lot of companies are exempted but the paperwork is (as always) more important than ever!
2. Mind the Capital Gains Tax (CGT):
Gains from the sale of property in France are taxable. The tax regime varies whether the property is directly owned by an individual or a company. For individuals, gains are taxable with a complete exemption after 22 (30 if we include the social tax side) years of ownership. For companies, taxation depends on the entity type and may involve different rules for calculating capital gain. Non French companies will calculate their CGT from the depreciated figure… in simple words the longer the company owns the property the higher the taxation is…..