Taxation for Property Owners in France and Monaco
Below is a brief outline of the tax situation in France and Monaco. It is by no means meant to be anything more than a rough guide. Professional advice from a tax specialist needs to be sought for your individual case before making any commitment to a purchase. Whilst every effort has been made to give accurate information at the time of writing, it is important to note that taxation laws in France are reviewed annually so do verify that any figures you see on this site are indeed the most recent.
Taxation in France will depend on whether you are a permanant resident or a non resident who comes occassionally to enjoy his holiday home.
Inheritence Tax (Loi de succession)
France: This is a legacy of Napoleonic law and a minefield of potential problems. Basically even if you are not French or even anything other than a holiday home owner, when you or your partner pass away you will be confronted with this law as the French property will be subject to French loi de succession and not English inheritence law.
Basically it is not your will (if you have written one) that counts, but French Law. You cannot disinherit children, even from a previous marriage.
For example, A man has been married and had two children. He divorces and marries again. He and his new wife buy a French property together. On his death the wife has to share her home (or more to the point the proceeds of her home) with the children from the previous marriage. Effectively, in many cases the surviving spouse is obliged to sell her home as the children demand immediate payment for their share. If she has sufficient funds she could pay them off and keep her home, but otherwise there is little alternative.
Luckily there are solutions. Structuring to avoid French Inheritance Tax problems is very important and should be considered before the purchase of property in France.
One way of avoiding the effects of French Inheritance law is to set up a company for the purpose of buying the property. Such companies are called 'sociétés civiles immobilières' or SCI. If you own shares in an SCI, which owns the property, you can dispose of them in accordance with the law where you are domiciled. This will not lead to the avoidance by your heirs of inheritance tax it merely means that you will be able to dispose of the property as you see fit.
Monaco: One of the rare situations where you are taxed in Monaco. For a UK resident the rate will be between 0% and 16%, depending on the relationship between the parties.
Income Tax (Taxe sur le revenue)
France: The permanant resident is liable for Income Tax in France on his worldwide income. The non resident is not taxed unless he has income originating from France in which case he will be taxed on that part only of his world income.
Monaco: No tax.
Land Tax (Taxe Fonciere)
France: Paid by all who own property. Annually at the end of the calender year.
Monaco: No tax.
Habitation Tax and TV Tax (Taxe d'Habitation & Taxe audiovisuelle)
France: Paid together by all who reside in France whether full time or not. Also applies to tenants. Due annually at the end of the calender year. No TV tax if you do not own a TV set.
Monaco: No tax.
Wealth Tax (Impot sur la Fortune)
France: Payable by all residents full time or not who have assets in excess of 750,000 Euro. The actual tax due is calculated according to a graduated scale starting at 0.55 % and reaching 1.8 % for assets worth over 15 530 000 euros. This tax can be totally avoided by taking an interest only loan or deferred by the means of a classic loan. (Assuming you have no other sizeable assets in France).
Monaco: No tax.
Capital Gains Tax (Taxe sur le Plus Value)
France: Payable on the sale of a French property. At the time of writing it is 16% on the net profit (after allowable deductions) for a non resident, 27% for a resident. This reduces over a 15 year period at which time you are exempt. Also no Capital Gains Tax imposed if it is your primary residence.
Monaco: No Tax.