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The 2023 Abolition of the Housing Tax

Volume XVIII, Issue 47

A typical building style in Paris France

One of the most surprising aspects of property ownership in France is the low property taxes assessed annually on homeowners, considering that France is well-known to be a highly taxed society. On the whole, I find that property taxes are about ONE-TENTH of what they are in the U.S.!

There are two taxes assessed annually: Taxe Foncière and Taxe d’Habitation.

The property tax, Taxe Foncière, is always paid by the owner of the property. The housing tax, Taxe d’Habitation, is in fact due by the one who has the use of the accommodation on January 1st: the owner, the tenant or a free occupant. Surprisingly, too, the figures for each have tended to be about the same, even though their basis is different…until now.

France's Taxe d'HabitationThe basis for calculation of the Taxe d’Habitation is not nearly as simple as it is in the U.S.—which is normally a percentage of the current assessed value of the property. In the case of France, the cadastral rental value of the property serves as a tax basis for the various local taxes. This rental value is set after consultation with the municipal or departmental direct tax commissions during land review operations and can be modified according to different events affecting the property. Yes, I know it’s a mouthful and why it’s pretty tough to determine the tax on your own.

To understand this in greater detail, visit this site (in French).

Taxe d’Habitation is an ongoing conversation among property owners and government administrators. While it is the responsibility of the occupant of the property on January 1st, it isn’t assessed or paid until the following Fall. We have several clients in the midst of purchasing property now at the end of the year—with delays because of the pandemic into 2021—that creates a situation whereas the seller will end up taking responsibility for the payment of the tax for 2021. The sellers aren’t happy about this and we find ourselves negotiating with the other party to determine who will pay it, or if it will be shared somehow.

The rules around Taxe d’Habitation have changed since Emmanuel Macron took office as President of the Republique, lowering them to the point of abolishing this tax to benefit those who can least afford them. The Macron reform will be gradually implemented until a total exemption in 2023.

For principal residences, there will be total abolition of the tax for all by 2023. Second homes are excluded from the exemption arrangements. Certain categories of taxpayers, such as the elderly, already benefit from an exemption from housing tax.

Reduction of the Taxe d'Habitation in France

In 2020, exoneration of the tax could have been 100 percent, depending on the income of the household. The housing tax is sometimes established in the name of several residents who may come from different tax regimes when, for example, adult children live with their parents. The administration then takes into account all the income of the residents concerned:

27,706€ for 1 part of the family quotient
35,915€ for 1.5 share of the family quotient
44,124€ for 2 shares of the family quotient
+ 6,157€ for each additional half share

Tax households whose 2019 reference tax income exceeds these ceilings do not benefit from the 100 percent relief in 2020 but may be entitled to a declining reduction if their 2019 reference tax income does not exceed the increased ceilings below:

28,732€ for 1 share of the family quotient
37,454€ for 1.5 part of the family quotient
46,176€ for 2 shares of the family quotient
+ 6,157€ for each additional half share

In principle, taxpayers who paid their housing tax via monthly installments continued to pay their monthly installments in 2020, even if they were exempt from the 2020 housing tax. They have to wait until the end of this year to be reimbursed for this advance made to the tax authorities. But, to anticipate and avoid having to pay this advance, taxpayers can apply for cancellation or modulation of their monthly payments via their personal space on the tax site.

The 100 percent rebate applicable in 2020 above applies in 2021 and 2022, with updated income ceilings:

27,761€ for 1 share of the family quotient
35,986€ for 1.5 share of the family quotient
44 211€ for 2 shares of family quotient
+ 6,169€ for each additional half-share

The same applies to the progressive tax relief, with the following increased ceilings:

28,789€ for 1 part of the family quotient
37,528€ for 1.5 share of the family quotient
46,267€ for 2 shares of the family quotient
+ 6,169€ for each additional half-share

It is possible to pay the housing tax again if you benefited from last year’s rebate but your income has increased. In other words, the exemption for a given year is not definitive: a taxpayer must therefore pay the housing tax as soon as he or she moves into a different income bracket the following year.

Regardless of their income level, all taxpayers who still have to pay a housing tax will benefit from an exemption from:

– 30 percent of their housing tax in 2021. They will therefore pay only 70 percent of the tax normally due.
– 65 percent of their housing tax in 2022.
– The housing tax on principal residences will be totally abolished in 2023 for all taxpayers.

For more detailed information (in French) visit this website.

Keep in mind that second homeowners are not concerned by the reforms as they will continue to pay the tax at the full rate.

If you are paying too much tax, you might want to visit your personal online account. To make the changes, enter your login/password information or create an account if haven’t already. Go into your personal space and click “Paiement,” then “Gérer mes contrats de prélèvement.” Choose your Taxe d’Habitation contract and click “Moduler vos prélèvements mensuels.”

Write the amount of your estimated tax for 2021, factoring in the 30 percent reduction and including the amount of the public audiovisual services fee, assuming you have a TV (138€)*. To help you estimate your reduction there is an online tool. Note that there will be no penalty if your estimate is not exactly correct. You will just have to pay a little more (or obtain a refund) to cover the true tax bill at the end of the year. If you make this modification before December 15th, it will apply from January’s installment, otherwise, it will only apply from February.

The redevance audiovisuelle for tv ownership in France

* The contribution to public audiovisual services, or “redevance audiovisuelle,” must be paid if the resident is liable for housing tax and if they own a television or an equivalent device. It was used to finance public television and radio broadcasters (France Télévisions, Arte-France, Radio France, RFO, RFI, and the National Audiovisual Institute). If the household does not own a television or an equivalent device, taxpayers must specify this on their income tax declaration to be exempt from the license fee.

A typical Nicois building in Nice FranceInterestingly, you might also be surprised to learn that Paris is not the most expensive place in France to live. The housing tax basis is one of the lowest in the country, as is the cost of transportation. The public system is highly efficient and inexpensive so there is no need to own a car. With rent controls in place, the cost of rent is platformed and because of the size of apartments, utility costs are low.

The bottom line is that while the entry costs to purchase a property in France are high (7.0 to 7.5 percent for closing costs), the cost of ownership is low…about ONE-TENTH of what it costs in the U.S.! Your retirement income will stretch a whole lot further in France while improving your lifestyle and enriching your life living in Europe.

What’s not to like about that?

A bientôt,

Adrian Leeds Paris FranceAdrian Leeds
The Adrian Leeds Group

 

Postmarked from Paris

 

DeepL AI Assistance for LanguageP.S. If you want the best online translator since peanut butter to read all these complicated French websites, visit Deepl and download the app.

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