The Tax Man Says Happy New Year

On Sunday, January 1st, 2012, whomever inhabits a property in France, will be responsible for paying the annual Taxe d’Habitation (resident tax). It’s an interesting way to start the new year — although fortunately, it’s not paid until the end of the year.

France has a bad reputation for high taxes, but you would be very surprised to learn that property tax in France is actually very low, particularly in Paris.

There are two types of tax due annually: Taxe d’Habitation and Taxe Foncière (property tax). These taxes go towards your local community for things like street cleaning, trash collection, education, community facilities and of course, the administration.

Taxe d’Habitation is paid by the party resident in the property on January 1st. If you own an apartment and rent it 100% of the year, then your tenant will be responsible for paying this tax. If not, then you will be liable.

Taxe Foncière is paid by the owner. Both taxes often are very similar in cost and amazingly, each seems to equate to approximately 1€ per 1000€ of the value of the property annually. Yes, you read right. An apartment of 50m2, valued at about 500,000€ has a tax bill of about 500€!

By comparison, in the U.S., the lowest tax rate is 0.18% (Louisiana) and the highest is 1.89% of the value (New Jersey). So, take the same example. A $500,000 property in Louisiana has a tax bill of $900, but the property in New Jersey has to choke up $9,450.

The assessment in France is not based on the value of the property, as it is Stateside, but is determined by a notional rental value of the property known as the valeur locative cadastrale. Changes to your property, such as the addition of central heating, another bedroom or a swimming pool have an impact and therefore on your tax assessment. These changes are required to be reported to the tax authorities (Centre des Impôts Fonciers or Bureau de Cadastre) within 90 days of completion of the work.

The valeur locative cadastrale is reviewed by the administration every year to determine if a tax increase is due or not. An update on the status of the local taxes was just released by the Paris City Hall this week. It reports that after an increase in tax was imposed in 2009 of 9%, the city now confirms that there will be no increase of tax until 2014.

Despite the increase of last year, Parisians pay well below those of other major cities in France. It is also worth noting that the Taxe d’Habitation includes the television license fee, and this is obligatory to pay if you have a television at all in the proper
ty, whether or not you claim to use it to watch television! 

Taxe Foncière assessments are sent out normally at the end of August and are due October 15th. Taxe d’Habitation is assessed September 30th with a deadline of November 15th for payment. If you choose to pay online (Tax Payment Online), you get an additional five days grace period after the payment date stated on your tax notice.

From a personal sentiment, I have never minded writing that check every year to the tax authorities. While tax is a necessary evil if we want to live in a sophisticated society, here there is evidence that the money is (generally) well spent. Every evening the garbage trucks pass keeping the streets clean — daily. The public schools were better than excellent for my daughter who graduated with an international baccalaureate degree — at no charge. Around the corner, the historic iron marketplace, the “Carreau du Temple,” is now under renovation to become a public multi-purpose facility of which we can all take advantage. The City Hall of the 3rd arrondissement was the first to provide WiFi all over the district many years ago and never stops providing programs of all sorts on the public level.

I could go on and on and on, but it would just make you wonder where all that tax you pay Stateside really goes. Do you know? 

A bientôt,

Adrian Leeds
Editor, French Property Insider

(photo by Erica Simone)

Email: [email protected]

 P.S. Happy New Year! May this year be the year you invest in France!