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Buying In France |
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Outlined below are some of the key things you will need to know when purchasing a property in France. For more information on any of these sections please contact us. Commission No commission is paid by the Buyer. Please refer to the “Selling Your Home” section. The buyer will however pay the Notaire’s fee which is covered in the Legal Fees section further on. Construction Guarantee’s All new build construction in France must have a 10 year guarantee against defects that is supported by an insurance policy to protect the purchaser should the constructor cease trading Currency Working with several different currency brokers who have helped many clients over the years, we would be happy to make appropriate introductions should you wish. Inheritance Most importantly are the French inheritance laws which will relate to your new French home even if you are a resident outside France. The fact that you may have a Will outside of France, will not necessarily mean that it is appropriate to be translated to relate to French Law. It is advised those purchasing French property also make a French Will to deal with your property so that should the property need to be sold because of bereavement then there will be no problem relating to inheritance because succession must be dealt with in France. Any will outside of France should then exclude your property in France. For those making a very expensive purchase it is worth speaking to legal representation about the purchase to minimise the effects of French Inheritance, thereby ensuring the property passes to directly to the surviving spouse. Legal Fees As in Switzerland, in France one notary generally acts on behalf of the purchaser and seller. This is particularly the case of a new build project where the Notary has been involved from conception and thus understands the project fully. Should the purchaser however wish to use another notary this is also possible and the two notaries share the total fee between them. Legal costs which is a combination of Notary fees and taxes typically amount to approximately 3% of the purchase price for a new build property and 7% for re-sales. It might be worthwhile purchasing a property in the name of a French Company that you set up known as an SCI, particularly if friends or two families are buying together. While there are no savings on purchase, the company is not liable to pay any annual Wealth Tax, minimises Inheritance Tax and allows you the ability to change ownership more easily. However any usage of the property free of charge by the company members or any rental income must be declared in their personal tax returns. Similarly on selling the property all Capital Gains must be declared on selling. If you would like more information on setting up an SCI we would be pleased to discuss this further with you when you visit. The information above merely acts as a basic guide to what you can look at when purchasing. We would be pleased to provide details of legal professionals to speak to in more detail that can advise you further on the merits / disadvantages of the SCI. Capital Gains Tax This is the difference between purchase price (plus any renovation work completed) and the sale price. The gain is then taxable at a set rate of 16% for European’s (extra 10% Social tax for French Residents) or flat 33% for non Europeans. The new rules state renovation work is that completed by a French artisan having produced an invoice for the work. There are however deductions based on how long you have owned the property. There is no deduction for the first 5 years of ownership but every year from then on allows you to deduct 10% off your Capital Gain. Properties owned for more than 15 years are free of Capital Gains Tax. Mortgages We work with a number of UK and French Banks specialising in Mortgages for property purchase in France. We would be very pleased to provide you with a list of contacts to assist you in this process, once you have decided on the property you wish to purchase. Under French Law, French lenders are not allowed to offer mortgages where the purchaser’s repayments total more than 30% of their monthly income. This 30% must also include any existing mortgage you may have in your home country. Purchase Payments The details below are meant as a guide. Once you decide on the property you can discuss the payment structures specific to the property you wish to purchase. New builds These take the form of stage payments and are typically · 5% reservation · 15% la signature de l’acte authentique: Signing of the final Conveyance: Clients actually own the property at this point although not of course built · 10% achievement des foundations: Foundations · 10% au demarrage de l’elevation de rez de chaussee: Ground floor · 10% au demurrage du plancher haut de rez de chaussee: Floors in place · 10% au demurrage de la dalle sur le 1 etage: 1st floor concrete down · 10% a la mise hors d’eau: Watertight · 10% au debut des travaux de cloisons/doublage: Walls and internal insulations · 10% au debut des travaux de peinture · 5% a l’achevement: Finished building · 5% a la remise des cles: Snagging and handing over of keys
Note: some developer will have less stage payments and so therefore higher % amounts at each stage Re-sales 10% deposit on signing the Le Compromis de Vente. Balance when transfer of ownership takes place. In France there is a cooling off period from signing and paying your deposit of 7 days. Should you wish to withdraw during this period you are able to do so. However after this time it is not possible. Renting Local rental agencies can be found in all major mountain resorts, providing full rental and management services. There are two forms of rental options, touristic (weekly) and long term lets. In the former this is the most popular form of renting where owners use the property for themselves a few weeks a year while the latter is certainly an option in those resorts which are open all year round such as Morzine. We recommend clients wanting to rent the property they are purchasing, talk directly with the local agencies to get an accurate idea of what occupancy and returns they can expect as well as what the charges are. One option of ensuring a rental return (often guaranteed) is the Leaseback scheme run in France, where owners lease their apartment or chalet back to the developer, having a set number of weeks where they can use it themselves. By leasing back the property for more than 9 years, it is also possible to reclaim the VAT of 19.6% from the French Government. Some developers will deduct this from the advertised sale price automatically. Rental Taxes All rental income in France is subject to tax and must be declared to the French Tax office by 30th April. For amounts under 75,000 Euro’s per annum, the owner can simply pay tax on 30% of the gross income. For more information on this subject, we would be happy to make an introduction to one of the tax advisors we work with as part of your purchase procedure. Running Costs and Taxes The two local property taxes in France are “taxe fonciere” (exempt for the first 2 years in a new build) and “taxe d’habitation”. In the case of re-sale properties these figures are readily available and can be obtained for you when you decide on the property you wish to purchase. It is very difficult to calculate and provide an estimated general figure for the annual service charges as this depends on the size of the apartment/chalet as well as extraneous costs such as lift, shared swimming pool, caretaker and need for a grounds man (snow clearing / grass cutting). We would be happy to provide an estimate of these costs on the property you choose to assist you with the decision making process. Surveying It is not a legal requirement to carry out a survey. However, the seller has to provide the buyer with asbestos, termite and lead Certificates and certified area measurements according to the type of property and area in France. Should you wish a survey to be carried out for the peace of mind of your purchase, we do know professionals that will do this for you at a cost and you can discuss this further once you have found the property you wish to buy. Wealth Tax Property in France with a value in excess of 750,000 Euro’s (figures as of 2006) are subject to an annual Wealth Tax, charged on a sliding scale from 0.55 - 1.8% for assets amounting to 15,530,000 Euro’s. Any mortgages on the property may be deducted from the value of the property before your tax liability is calculated. Where properties are being purchased by two families then this amount can almost be halved. Wealth Tax is complicated and we would be happy to put you in touch with someone who specialises in this field. Useful Glossary To help you during the process of purchasing property or land in France we have produced a simple glossary below for your use. un accompte - deposit Disclaimer Please note these details have been prepared as a guide only. We recommend you take further advice with the Notary handling your purchase, Accountant, Tax Specialist or Rental Agency on anything you wish clarified before signing any contract of sale as we cannot be held legally responsible. |
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