New Tax Year, New French Law

 In Comment, Tax

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The new occupation declaration is receiving lots of attention – comply or risk a penalty fine.

My last article for LawSkills focussed on the reporting obligations in France for trusts. Yet another reporting requirement steals the spotlight here.

The French Government has removed the payment of taxe d’habitation for residential properties that are occupied as a primary residence. The tax remains for other residential properties, including second homes and those that are being let.

The Government needs to ensure they have an accurate record of the occupation status of all residential properties situated in France, in order to make sure that the exemption is applied only to primary residences.

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What is taxe d’habitation?

Property owners will be aware of two types of tax payable in France each year on their property – taxe d’habitation and taxe foncière. The relevant legislation for taxe d’habitation is set out in articles 1407 onwards of the French tax code – Code Général des Impôts. The properties subject to this tax include furnished residential properties. In some communes where the tax applicable to vacant residential properties is not levied, it can also be levied on vacant properties.

The tax is calculated by multiplying the rental value of the property and dependences (eg garage and outbuildings) by the rate of tax applicable (which is set locally). It will be important to make sure that the description of the property with the tax office is accurate. For example, any works to extend or reduce the size of a property must be reported, and this might result in a recalculation of the taxe d’habitation.

The taxe d’habitation is payable by the person in occupation of the property as at 1 January each year. This would be the owner of a second residence, or a tenant if the property is let, or the usufruitier in respect of a property in the ownership structure of usufruit. If the property is sold part-way through the year, the taxpayer as at 1 January is responsible for the tax for that year in full. If a property is bought part-way through the year, the first taxe d’habitation payment will be the following calendar year.

The statements are issued around October each year, for payment by mid-December. If the payment deadline is missed, the amount due can be increased by a penalty of 10% of the tax due.

What is the new law?

The Finance law for 2020 introduced a new provision into the French tax code specifying the legal obligation to declare to the French tax authorities certain information about the ownership and occupation status of a residential property.

Article 1418-I of the code général des impôts states :

Les propriétaires des locaux affectés à l’habitation sont tenus de déclarer à l’administration fiscale, avant le 1er juillet de chaque année, les informations relatives, s’ils s’en réservent la jouissance, à la nature de l’occupation de ces locaux ou, s’ils sont occupés par des tiers, à l’identité du ou des occupants desdits locaux, selon des modalités fixées par décret.

Owners of property for habitation are required to declare to the tax authorities, before 1 July each year, relevant information, if they reserve the use of the property, the nature of occupation of the property or, if they are occupied by third parties the identity of the occupant(s) of the said premises, according to the procedures set by decree.

The first time this obligation arises is in 2023, declaring the status of occupation of properties as at 1 January 2023.

What does a property owner have to declare?

All owners of a residential property are obliged to ensure that the records held by the tax authorities in France have the right information about the property, including the occupation status.

Unless a property owner has no access to the internet, the declaration of occupation must be made online, via a tax portal.

If a property owner is in receipt of income deriving from assets situated in France, he/she should be filing annual income tax declarations and will have an online tax portal already set up. If a property owner uses the French property as their holiday home only, there is unlikely to be a tax portal set up. However, it can be created through the completion of an online form, which includes uploading a copy of a piece of identification.

Once set up, the property owner will be given a fiscal reference, be able to see the taxe foncière and taxe d’habitation statements and make changes to online payments (for example set up direct debits). It will also be possible to check the accuracy of the property description (square meterage, number of rooms) to ensure the correct payment of tax, and then confirm who is in occupation of the property and how (primary residence, secondary residence, tenant etc).

What if there are tenants living at the property?

If the property is let to a third party, there is certain information that will need to be declared, such as the name of the tenant(s) and date of birth, and the start and end of the occupation period.

If the property is let on short-term lettings, the declaration must confirm the first date of the letting period and the method by which the lettings are managed (eg with or without a letting agent).

Properties owned via a corporate structure

These also have to be declared. The obligation is the same, whether the residential property is owned directly or via a company structure, such as a société civile immobilière.

Is this a one-time declaration?

The legislation states that there is no requirement to file an annual declaration, but there is a requirement to update the declaration if any circumstances change. For example, if the property is sold part-way through the year, the information for the property should be updated in the tax portal. However, this will not change the charge to taxe d’habitation for that year, as it is based on the situation of the property as at 1 January.

Don’t miss the deadline!

The deadline for providing the necessary information is 30 June 2023. After this date, all property owners in France who haven’t made the necessary declaration could receive a fine of €150. A fine could also be levied for incorrect or incomplete information.

For property owners in France, it’s becoming increasingly important to keep abreast of new laws and regulations in France. This declaration requirement is a hot topic of discussion amongst the French property-owning community, even though property owners might not yet have been informed directly by the tax office! For professionals reading this, who have clients that they know own a French property, or even owned by a client’s relative, it would be helpful to pass on the information in case they haven’t heard the news. We all know that time can pass so quickly and the end of June will be upon us before we know it!

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