There are two local taxes, called the taxe d'habitation and the tax foncière.
The rates of tax vary across the country, due to the varying rates of tax imposed by the regional and local governments.
Taxe d'Habitation
The taxe d'habitation is payable by the occupier of a residential property, who was occupying the property on 1st January.
If the property is your second home, even though you may not physically be resident on 1st January, the tax is still payable, provided the property is capable of occupation.
Thus, the law assumes that if you have the right of occupation of the property, and it is habitable, then the tax is payable.
Nevertheless, where you only use the property for a few weeks a year, and it is otherwise let out as a furnished letting, then you can be exempted from the tax, although you would then become liable for the business tax, called the taxe professionnelle.
If you let a property on an annual basis, the tax is payable by the tenant.
Tenants of holiday lettings do not pay the tax, but any tenant occupying the property on 1st Jan on a permanent, or even semi-permanent basis, is liable for the tax. The rule applies whether the property is furnished or unfurnished.
Calculation of the Tax
The determination of the amount payable is made by the local and county councils, but the calculation and collection of the tax is carried out by the central government tax authority.
The formula for the calculation is ponderously complex but, broadly speaking, it is based on the notional rent that the property might be expected to achieve in the open market, having regard to the condition, size and location of the property.
This amount may not bear any relation to any actual rent that may be being paid on the property and, indeed, the notional rental values have not been updated since 1970, so are now desperately out of date!
A formula is then applied to this notional rent based on the income the authorities need to raise.
Accordingly, the amount of tax will vary dependant on the decisions of each commune and the size and condition of each property.
You will not be able to establish the notional rental value used by the tax authority from the tax notice, as it is not stated on it. If you wish to check you will need to visit your local Centre des Impôts Fonciers (Service de Cadastre), whose contact details are given on the tax notice.
As might be expected the level of the tax is higher in towns than in the country. The amount payable each year varies so much between local tax authorities that it would be meaningless to state an average.
The tax demand is sent out towards the end of each year with a specified end date for payment, unless you elect to choose to pay on a monthly or annual basis by direct debit. You can also pay it via the internet, or by cheque.
If you move into the property mid-way through the year, then the former occupier is legally responsible for the tax for the whole of that year, subject to any private agreement that may be made.
Top Tip!
If you carry out major works to your property you are required to advise the tax authority (Form IL 6704), who will then undertake a revaluation of the property. The revaluation will be necessary if the works increase by at least 10% the rateable value of the property.
Exempted Properties
By definition, the tax is not payable if the property is not occupied.
However, the definition of 'occupation' used by the tax authority includes those properties capable of occupation. Ordinarily, this would imply that there would need to be furniture in the property, and that utility services were also available.
Local authorities have discretion to exempt chambres d'hotes and classified gîtes located in rural development areas (Zones de Revitalisation Rurale (ZRR) from the tax. You would need to approach your local mairie.
In certain cities and towns - Paris, Toulouse, Lyon, Montpellier, Cannes, Grasse, Antibes, Nice - the tax is payable on a property that has been empty for at least 5 years, with an additional penalty of 50% of the tax for those empty for at least ten years.
Other local authorities also have the discretionary power to levy a similar penalty, although in their case, the property need only be empty for two consecutive years, commencing 1st January.
In either case, the levy will not be applied if the property is empty because it is considered uninhabitable, and costs of the works exceed by 25% the value of the property.
Likewise, if you are a landlord of a property and you have tried without success to let it, you will not be obliged to pay the tax+ penalty, but you will need to demonstrate evidence of your efforts to try and let the property, and to have done so at a local market rent.
TV Licences
If you also have a television then the TV licence, called the la redevance audiovisuelle, is also payable with the tax d’habitation.
The annual cost of the TV licence is €116, which is subject to an annual index linked increase.
Only one TV licence is payable per household, irrespective of the number of televisions in a property, or the number of properties owned by the same household.
If you are granted complete exemption from payment of the taxe d'habitation, then this will also grant automatic exemption from payment of the TV licence.
Tax Relief
A reduction in the amount of tax payable, or complete exoneration from the tax, is available to certain groups of persons, provided the property is their principal home.
Where you have children, then relief of 10% to 15% for each dependant is granted, an allowance that is not means tested.
Complete exemption from the taxe d'habitation is granted to:
• i. Persons over 60 years of age;
• ii. Widowed persons irrespective of age;
• iii. Disabled, and in receipt l'allocation aux adultes handicapés (AHH) or;
• iv. Infirm/disabled and incapable of gainful employment;
PROVIDED in each case the property is your principal residence, your annual income is below the eligible threshold, and you are not liable for French wealth tax. Accordingly, you will not be eligible if you are 'asset rich, but income poor'. In the case of a married couple the age or disabled condition only needs to be met by one of the spouses.
The applicable income limits for 2009 are based on your net income for 2008 (revenu fiscal de reference), which cannot be greater than €9,837 for one person and €15,091 for a couple, a figure increased for additional family members.
It is also conditionable upon you not living with someone (eg son/daughter) who has an income above the eligible threshold.
If you do not fall into one of the above groups but you are on a modest income then a ‘cap’ is placed on the amount of tax that you need to pay.
The calculation of any such cap is complex but, to benefit, your income cannot exceed €23,133 per year for one person or €32,791 for a couple, with further increases for children.
Normally, these reductions and exonerations are granted automatically by the tax authority on the basis of information obtained from you annual income tax return. So you do not need to apply to receive entitlement.
Those in receipt of the social security benefit Revenu de Solidarité Active (RSA) also normally receive complete exoneration from the both the taxe d'habitation and the la redevance audiovisuelle.
If you think you may be entitled to tax relief, which has not already been accorded to you by the tax authority, then you should visit your local Centre d’impôts and discuss your circumstances with them.
Taxe Foncière
The taxe foncière is annual property ownership tax payable by the owner of a home, whether or not the property is actually occupied by them, or rented out.
The tax is levied on a collective basis by the local, departmental and regional councils and goes towards the funding of local services.
The tax is also payable on undeveloped land. There are exemptions for agricultural land and the owners of new property are granted limited exoneration.
Calculation of the Tax
The determination of the amount payable is made by the local councils, but the calculation and collection of the tax is carried out by the central government tax authority.
The basis on which the tax determined is similar to that of the tax d’habitation, although in a more straightforward manner.
So, broadly speaking, the basis of the assessment is the notional rent that the property might be expected to achieve in the open market having regard to the size condition and location of the property.
This amount may not bear any relation to any actual rent that may be being paid on the property as the notional rental values date from 1970.
A formula is then applied to this notional rent based on the income the authorities need to raise.
You will not be able to establish the notional rental value used by the tax authority from the tax notice, as it is not stated on it. If you wish to check you will need to visit your local Centre des Impôts Fonciers (Service de Cadastre), whose contact details are given on the tax notice.
Some local councils also make a separate charge for rubbish collection, in a tax called taxe d’enlèvement des ordures ménagères (TEOM), which is sent out with the taxe foncière. Where the tax is not levied, the costs of rubbish collection are funded from the general budget.
As might be expected, the level of the tax is higher in towns than in the country and also as between different regions of the country. The amount payable each year varies so much between local tax authorities that it would be meaningless to state an average.
The tax demand is sent out during the third quarter of the year with a specified end date for payment, unless you elect to choose to pay on a monthly or annual basis by direct debit.
The tax demand is called avis d’imposition tax foncière. The detail of the calculation will show you how much of the tax goes to the various councils and who is making the largest increase!
The tax has wide application to all types of property whether residential, commercial, industrial or professional.
Land is also subject to the tax, though to a lesser extent, and there are also exemptions for buildings of an agricultural nature. There is also relief for the planting of new woodland.
In the event you sell a property during the year you are obliged to pay the tax for the full year, although it is not unusual for there to be an agreement with the new owner concerning sharing of the costs, which needs to be incorporated in the sale and purchase agreement.
If you carry out major improvements to the property then you are obliged to notify your local property tax office in order that there can be a revaluation of the property. Likewise with a new construction.
The relevant forms can usually be obtained from the local mairie or contact your tax office responsible for local property taxes, called the Centre des impôts fonciers within 90 days of practical completion. For new houses you should use Form H1, whilst for major improvements to an existing property you should use Form IL6704.
Exempted Properties
New buildings, additions to existing buildings or rural conversions are granted full exemption from the tax for two years, provided the works are declared to the tax authority within 90 days of practical completion. Buildings of a non-domestic nature are only granted partial relief.
Tax Relief
There is an exemption from the tax for certain groups, although the net is not cast as wide as that of the local residence tax.
The following groups are granted relief from the tax:
• Persons over 75 years of age, provided they meet the income criteria;
• Registered handicapped persons irrespective of age in receipt of l'allocation aux adultes handicapés (AAH);
• Persons in receipt of the minimum vieillesse, a supplementary pension for elderly persons on a low income;
• Persons over 65 years of age, and less than 75 years, are entitled to a reduction of (at least) €100 in the amount payable, provided they meet the test of resources.
In all cases the relief is subject to the property being your principal residence.
The exoneration does not apply to that part of the tax related to rubbish collection.
The income limit in 2008, for relief in 2009, is €9,837 per year for a single adult, and €15,091 for a couple.
For the purposes of assessment to entitlement your ‘income’ is considered to be your revenu fiscal de reference as stated on your tax notice for the previous year. This figure is, of course, always lower than that of your actual gross income.
There is also discretion to the local councils to grant relief on payment of the tax to those on low incomes, but this is not widely adopted because of the importance of the tax on the accounts of these councils. You should check the tax demand you receive to see whether your council had adopted any of the discretionary exemptions.
If you are a landlord and you are having difficulty in letting a property, or you are carrying out major works that makes it unsuitable for letting, then you can also obtain relief from payment of the tax.
The property must be incapable of occupation or otherwise vacant for at least three months despite your best efforts get it occupied. Proof of works or attempts to let must be supplied and if the rent you are seeking is considered excessive you may not be granted relief.
Finally, local authorities also have discretionary powers to grant up to 100% exemption for a period of five years, for those properties built before 1989 where major energy conservation measures are undertaken.
Only those works carried out since January 2007 are eligible, and the cost of the works cannot be less than €10,000 in a single year, or €15,000 over three years.
Accordingly, if you are planning a major renovation project to an older property, you should make contact with your local authority to find out if they have agreed to grant this relief.