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

On the sale of the property, any gain in the value of the property is subject to capital gains tax (16% for EEC residents or 33% for non EEC residents). Capital gains tax is reduced by 10% per annum between years 5 and 15. After 15 years of ownership there is no capital gains tax to pay. The scheme is therefore far more beneficial if it is considered as a long-term investment, however of course this is not obligatory.

NB. Bear in mind that you may have an additional income tax or capital gains tax liability in your country of residence. However, France does have double tax treaties with most countries.

VAT

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.

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.