Notaire’s Guide : Taxation in France explained for non-French

Welcome to the French tax system! At Actes Alliance Notaire, we know that understanding taxation in France can feel like navigating a maze, especially for our non-French clients.

Actes Alliances Notaire has offices in the heart of the French Alps including Salins-Fontaine, Segny, Val Thorens, Alpe d’Huez, and Grenoble.

Whether you are a non-resident buying a luxury ski chalet, an expatriate settling in Paris, or a foreign investor seeking high rental yields, grasping the nuances of French tax rates is essential. The French tax landscape is divided into several primary categories:

• income tax,
• value-added tax (VAT),
• corporate tax,
• and specific property and wealth taxes.

These levies are the backbone of the robust French public finance system.

Many foreign buyers attempt to navigate French taxation using online templates or standard advice. This is a highly risky approach.

Without a tailored analysis of your personal, fiscal, and economic situation, you risk double taxation, severe financial penalties, and blocked transactions. As your trusted public officer, we provide independent, conflict-free guidance to secure your investment and ensure full legal and fiscal compliance. We put our legal and tax expertise at the service of your wealth strategy.

1. Types of Taxes in France

To give you a global vision, here is a quick breakdown of the main taxes you will encounter:

• Income Tax (Impôt sur le Revenu): A progressive tax based on your income brackets. It covers salaries, business income, and rental income. Special flat rates apply to capital gains and dividends.
• Value Added Tax (VAT or TVA): The standard VAT rate in France is 20%. Reduced rates exist (e.g., 10% for restaurants and some renovations, 5.5% for essential goods).
• Corporate Tax (Impôt sur les Sociétés – IS): Generally set at 25%, this tax applies to companies’ profits. Special rates apply to SMEs.
• Wealth Tax (Impôt sur la Fortune Immobilière – IFI): This targets individuals whose net real estate wealth exceeds €1.3 million.
• Local Taxes: Includes the Taxe Foncière (paid by property owners) and the Taxe d’Habitation (now mostly applicable only to second homes).
• Social Charges (Cotisations Sociales): Additional levies on income and capital gains, which vary depending on whether you are a resident or non-resident.

Dealing with these various taxes on your own can lead to unexpected financial overlaps. As notaires, we analyze your global situation—legal, fiscal, economic, and family-related—to propose tailored and secure solutions. For instance, choosing the right corporate structure, like a SCI (Société Civile Immobilière) or an SARL, can optimize your tax liability. Many other structures must be considered, keeping in mind that simplicity is often a good choice.

2. Corporate Tax in France: Key Considerations

If you plan to set up a business or hold your French properties through a commercial company, you will be subject to Corporate Tax. The standard corporate French tax rate is 25%.

Small and Medium-sized Enterprises (SMEs) can benefit from a reduced rate of 15% on the first €42,500 of profits. For international investors, navigating double taxation is a primary concern. France has an extensive network of tax treaties to ensure you are not taxed twice on the same income.

Drafting company statutes using generic online templates is a major risk; it fails to account for your specific marital regime, shareholder numbers, or tax objectives, potentially leading to corporate blockages. Every binding decision in business law requires legal and tax rigor. We draft customized statutes and ensure optimal legal security for every corporate operation.

3. Wealth Tax in France (IFI)

The Impôt sur la Fortune Immobilière (IFI) is a crucial consideration for prestige property buyers in the Alps or on the French Riviera (Côte d’Azur, the south east coast of France). If the net value of your global real estate assets (for residents) or French real estate assets (for non-residents) exceeds €1.3 million, you must consider paying this tax.

Rates are progressive, starting at 0.5% and reaching up to 1.5%. There are very well known exemptions : for example, primary residences benefit from a 30% value deduction. Many other simple strategies can reduce or delete wealth tax liability, specifically for a non french tax resident owner.

4. Tax on Property: Taxes on Acquisition and Ownership

When buying property in France, you will encounter Property Transfer Taxes (Droits de Mutation), often mistakenly called “notary fees.” These taxes amount to roughly 7-8% for older properties and approximately 2% for new builds.

As an owner, you will pay the Taxe Foncière annually. If the property is your second home—a common scenario for our luxury ski resort clients (such as Courchevel, Méribel, Val d’Isère, Megève, Val Thorens or Alpe d’Huez) you will also pay the Taxe d’Habitation.

A real estate transaction cannot proceed without considering its fiscal aspects. Of course, operating the transaction without a notaire is legally impossible in France. However, we also have a deep added value on negotiating the deal and setting up the good structure for purchase.

We gather all required technical diagnostics upfront to avoid any subsequent disputes and secure your purchase. To bridge the language gap, we can even draft your preliminary sales agreement (compromis de vente) in both French and English upon request.

5. Value Added Tax (VAT) in France

The standard VAT rate is 20%. However, if you are renovating an older property in the Alps, you might benefit from a reduced rate of 10% for labor and materials, or even 5.5% for energy-efficiency improvements.

For investors buying off-plan (VEFA) or newly built properties, the 20% VAT is generally included in the purchase price. In many cases, you can actually reclaim this 20% VAT!

VAT reclaims involve strict operating contracts and billing processes combined with a precise fiscal timing. Attempting this alone can result in the tax authorities denying the reclaim, which may cost you 20% of your property’s value! We structure your real estate investment to set up the optimal framework, ensuring you seamlessly benefit from VAT advantages.

6. Social Charges and Contributions

Social charges (Cotisations Sociales) are a unique feature of taxation in France. They apply to salaries, business income, and notably, rental income and capital gains.

For non-residents earning French rental income, the standard social charge rate is 17.2%. However, if you are a resident of another EEA country (or the UK, under certain post-Brexit agreements) and contribute to your home country’s social security, this rate may drop significantly to a mere 7.5%.

Miscalculating your residency status and the applicable social charges can lead to heavy overpayment. By having a notaire review your fiscal strategy, you guarantee compliance while maximizing your net yields.

7. Common Pitfalls in the French Tax System

Navigating taxation in France can be tricky, and taking a “DIY” approach or relying on home-country habits often leads to costly mistakes. Here are the most common traps our international clients face, particularly when structuring their property purchases. 

Trap #1: Buying French Property Through a Non-French Company

Many of our foreign clients plan to purchase their French luxury chalet or Riviera villa using their existing company (such as a UK Ltd or a US LLC). While this seems convenient, it triggers specific tax implications for non-French companies investing in real estate in France:

• The Annual 3% Tax: Legal entities owning real estate in France as of January 1st are subject to an annual 3% tax based on the property’s market value. While there are exemptions (for instance, if your company is based in a country with a tax evasion agreement with France), claiming this exemption requires meticulous annual paperwork. Missing a filing deadline means paying 3% of your property’s value every single year!

• The Corporate Capital Gains Tax (CGT) Trap: When selling the property, the tax regime varies drastically. For individuals, French tax rates on capital gains decrease over time, resulting in a complete exemption after 22 years of ownership (30 years including social charges). However, for companies, the capital gain is calculated from the depreciated figure of the property. Put simply: the longer your foreign company owns the property, the higher your taxable gain will be when you sell it!

Trap #2: Double Taxation and Missed Deadlines

Failing to apply international tax treaties correctly can lead to paying taxes twice on the same income. Furthermore, missing French tax deadlines or failing to declare foreign bank accounts can result in financial penalties and surcharges from the French tax authorities.

This is where generic advice fails and our bespoke notarial expertise matters. What happens if you buy through your foreign company without consulting us?

You might unexpectedly have to pay the 3% annual tax due to a missed form, or face an important Capital Gains Tax bill upon resale because of corporate depreciation rules.

By consulting Actes Alliance Notaire before your purchase, we analyze your global situation. We might advise you against using your UK or US company, and instead help you set up a French Société Civile Immobilière (SCI). We handle the complex paperwork, ensure you benefit from all exemptions, and optimize your long-term French tax rates.

We provide tailor-made, legally secure advice so you can invest with absolute peace of mind.

8. Conclusion

Understanding taxation in France—from progressive income tax to the 25% corporate tax and the complexities of the IFI—is critical to the success of your real estate or business ventures. While French tax rates may seem complex to non-residents, a well-structured project can yield incredible profitability and legal peace of mind.

At Actes Alliance Notaire, we are more than just paper-signers; we are the legal and tax counsel for your family and your business. Because your wealth is precious, a maximum level of competence and security must surround your wealth management. Do not risk your time, money, and legal standing by going it alone.

Contact our Alpine offices today to build your bespoke, secure French investment strategy.

Contact our international team now to secure and optimize your transaction.

You can also call us :

📞+33 (0)4 7924 6222