French Property Sellers – Be Prepared

 In Tax

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With the summer holiday season fast approaching, many will take a trip to France to view properties, perhaps with a move in mind, or to buy that longed-for holiday home or investment property.

For those who already have their property on the market, as well as those thinking of selling soon, it’s important to understand the costs involved, to hopefully avoid unexpected surprises and be sure on how much money will land in the bank account after completion.  

This is a quick reference guide to the costs and expenses a French property seller can expect to have to budget for.

Estate Agent and Notaire Fees

Here’s the good news. Generally, the estate agent’s fees are paid by the buyer (the property will be marketed “FAI” – frais d’agence inclus) and the agent will confirm the net sale price to the seller (prix net au vendeur).

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The buyer pays the legal costs of the transaction (unless agreed otherwise). This will include the Notaire’s legal fees, associated disbursements, and the land registration tax (taxe de publicité foncière).

Diagnostic Reports

A seller has a legal obligation to provide to a buyer a series of technical reports (dossier de diagnostic technique – DDT) covering various aspects about the property. The full portfolio of reports depends on the property and its location. The main reports listed below include two requirements that are the result of legal changes in 2023:

  • Energy Performance (DPE)– this must be produced prior to the property being marketed for sale. It rates the energy efficiency of the property and sets out recommendations for improving energy efficiency.
  • Energy audit – since 1 April 2023 an additional energy audit must be carried out if the DPE reports a rating at F or G (extending to E from 2025 and D from 1 2034). The cost of this audit alone could be around an additional €500 or so;
  • Individual drainage system –this report must be produced to confirm whether or not an individual drainage system conforms to regulations;
  • Asbestos – obligatory for properties constructed before 1 July 1997, to report on whether any asbestos is present;
  • Lead – obligatory for properties constructed before 1 January 1949, to report on whether any coatings contain concentration levels of lead;
  • Gas – for properties containing an internal gas installation of more than 15 years old;
  • Electricity – where the electrical system is over 15 years old. The report will comment on any anomalies in the system;
  • Local risks –confirms whether the property is situated in an area susceptible to certain risks, such as landslides, avalanche, flooding, concentration levels of radon etc.
  • Termitesobligatory for some areas of France. The expert will comment on whether there is an indication of the presence of termites at the property.
  • Carnet d’Information du Logement (CIL) – for new buildings (and renovated buildings) subject to a local authority permission or declaration since 1 January 2023, the seller must produce documents relating to the works (eg plans, utilities networks, materials used, details on the heating and water systems).
  • Loi Carrez – for properties divided into lots (eg an apartment) the seller must also produce a report stating the surface area of the property being sold.

Each report has a validity duration. If completed a long time before a buyer is found, some reports may have to be updated.

All reports must be prepared by a regulated expert holding suitable insurances. The cost of the DDT depends on which reports are required and the type and size of property. A seller could expect to pay at the lower end perhaps around €400 or so, or as much as €1,200 (or more) if all reports are required. An energy audit cost may need to be added to this (see above). The expert should provide a quote prior to undertaking the work. 

Property and Land Taxes

A seller remains responsible to the tax authorities for paying both the taxe d’habitation and taxe foncière in the calendar year of sale. However, the seller is entitled to a direct reimbursement from the buyer of a portion of the taxe foncière for the period referring to the date of completion to 31 December next.

Insurances

The property must be kept insured to completion. Once a completion date is set, the seller can inform the insurer of the impending completion and then send the statement of sale (attestation de vente) to confirm completion and formally notify  termination of the insurance policy. Check the terms of the policy carefully to ensure the correct cancellation procedure is followed.

Mortgage redemption

The seller will need to seek a redemption figure from the lender (where applicable) to budget for this cost out of the sale proceeds, and pay costs associated with removal of the legal charge over the property.

Service charges for a copropriété

If the property is in a copropriété, the service charges will be payable up to completion. Charges for the quarter in which the sale takes place must be paid and the buyer will make a pro rata reimbursement for the period falling after completion day.

The seller must also pay the Syndic’s administrative fee levied for its involvement in the sale. The Syndic must provide certain information about the owner and the copropriété, including financial information, within a document known as the état daté.  The fee charged by the Syndic may vary, but a decree currently limits the fee to €380.

Capital Gains Tax

If the property isn’t the seller’s main residence at the date of sale (with some exception given for properties which have been the main residence when it was put on the market but the seller has since moved out) a calculation to French capital gains tax (CGT) must be made, reported and paid to the French tax authorities. The rate of French CGT on the net capital gain is 19%. In addition, social charges (charges sociales) are payable at a maximum rate of 17.2% (reduced to 7.5% in some circumstances, including for a British national affiliated to the British health system and not connected with the French health system, provided evidence of this is given).

The French tax calculation gives some reduction in the taxable gain for the length of ownership after five years. After 22 years the gain becomes exempt from CGT, and exempt from social charges after 30 years.

UK resident sellers must also consider their UK CGT position. The rates of UK CGT for a residential property are 18% for any portion of the taxable gain sitting within the income tax basic rate band, when added on top of the income for the tax year of sale and 28% thereafter.

The UK and France provide double tax relief by allowing a credit for CGT paid in the other country.

It’s highly recommended for a seller to get an idea of the likely tax liabilities in both countries before accepting an offer so as to be sure of how much tax to budget for (and also to understand the timeframes for paying the tax).

Additionally, a non-EU resident selling a French property where the share of the sale price is over €150,000 must appoint a fiscal representative in France to report the CGT on his behalf. A professional fiscal representative company could charge a fee somewhere between about 0.4% and 1% of the sale price. In many cases this will be a not insignificant cost to have to budget for.

It’s best to plan and be prepared in order to avoid unexpected surprises.

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