Taxes and Other Costs

Income Tax

The rental income that you receive from the leaseback property is liable to French income tax. If you decide to take a French mortgage to buy a leaseback property, then you can offset the interest payments against tax resulting from the rental income.

Capital Gains Tax

If you are a French resident, then your main residence will not be liable to Capital Gains Tax.

On the sale of an investment property, any gain in the value of the property is subject to capital gains tax. The rate of CGT depends on where you are resident:

French Residents	34.5% (capital gains tax at the rate of 19%, plus 15.5% social charges)
European Union Residents	34.5% (capital gains tax at the rate of 19%, plus 15.5% social charges)
Non EU Resident	48.8% (capital gains tax at the rate of 33.3%, plus 15.5% social charges)

To encourage long term investment into the French property market, after the first five years, the capital gain liability is reduced for each year that you own the property.

This taper relief is calculated as follows:

No allowance for the first 5 years Between years 6 and 17       -   2% allowance per year Between years 18 and 24     -   4% allowance per year Between years 25 and 30     -   8% allowance per year

For example, if you owned the property for 15 years...

• First 5 years no exemption
• Years 5 to 15 = 10 years x 2% pa = 20%

Therefore if you were a resident of France or the EU then your CGT liability would be 38.6% (34.5% less 20% reduction)
Number of years property owned	Allowance	Net Tax French & EU Resident	Net Tax Non-EEA Residents
1 Year	0%	34.50%	48.30%
2 Years	0%	34.50%	48.30%
3 Years	0%	34.50%	48.30%
4 Years	0%	34.50%	48.30%
5 Years	0%	34.50%	48.30%
6 Years	2%	33.80%	47.30%
7 Years	4%	33.10%	46.30%
8 Years	6%	32.40%	45.40%
9 Years	8%	31.70%	44.40%
10 Years	10%	31.00%	43.40%
11 Years	12%	30.30%	42.50%
12 Years	14%	29.60%	41.70%
13 Years	16%	28.90%	40.50%
14 Years	18%	28.30%	39.60%
15 Years	20%	27.60%	38.60%
16 Years	22%	26.90%	37.80%
17 Years	24%	26.20%	36.70%
18 Years	28%	24.80%	34.70%
19 Years	32%	23.40%	32.80%
20 Years	36%	22.00%	30.90%
21 Years	40%	20.70%	28.90%
22 Years	44%	19.30%	27%
23 Years	48%	17.90%	25.10%
24 Years	52%	16.50%	23.10%
25 Years	60%	13.80%	19.30%
26 Years	68%	11%	15.50%
27 Years	76%	8.20%	11.50%
28 Years	84%	5.50%	7.70%
29 Years	92%	2.70%	3.80%
30+ Years	100%	0%	0%

Supplementary Tax

Since 1st January 2013 a supplementary tax is also payable on large gains. The rate of tax depends on the size of the gain.
The rates applicable are:

Amount of Gain	Rate
Greater than €50K up to €100K	2%
Greater than €100K up to €150K	3%
Greater than €150K up to €200K	4%
Greater than €200K up to €250K	5%
Greater than €250K	6%

Upon the sale of a property the Notaire will ensure all taxes are paid before the proceeds from the sale are paid to the seller.
We recommend that you seek tax advice when selling a property in France to ensure that you make full use of all your allowances.

VAT due on a new French Leaseback property

In most cases you pay the (VAT) TVA when purchasing the property and receive it back from the French government within 5 months. Some of the larger developers advance the VAT (TVA) to the purchaser up front, and they receive the money back from the government.

If you sell the property within 20 years, then the VAT (TVA) needs to be repaid to the French government, on a pro rata basis, UNLESS you sell the property with the existing lease intact. This is normally the case as the purchaser will also want the guaranteed rental income.

Other Costs

The owner is responsible for supporting various costs, such as the taxe fonciere (land/buildings tax); taxe professionalle and sometimes a portion of the shared facilities costs, depending on the amount of weeks that are used personally. The owner is also responsible for any building or repair costs that fall outside the guarantees of the builder and the responsibilities of the management company as defined in the Leaseback Agreement.