In all cases, you earn a 4,43 % net profit at the end of the loan, i.e. €1,533 per month or €18,400 per year.

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French taxation law as applied to real estate property
owned in France by non-residents

Introduction

What follows is a simplified presentation of the implications of fiscal law in relation to the acquisition, ownership and sale of real estate property in France by non-residents whose fiscal residence is abroad.

As a non-resident potential owner of real estate property in Paris, you might be led to believe that the property you purchase will be taxed in the country where you reside.
This is not the case.
In real estate matters it is the law of the real estate location that prevails. As the property is located on French territory, it is the French taxation system that applies, except in rare cases where a special tax agreement between France and the buyer's country of residence stipulates otherwise. Therefore, it is important to be well informed about the possible existence of a tax agreement between France (where the real estate property is purchased) and the country that constitutes the buyer's fiscal residence.

Acquisition: what fees and taxes are involved ?

Paris-dream-apartments.com works in collaboration with numerous real estate agents to find your future pied-à-terre. The price of the properties presented always includes these agent’s fees, which are not regulated and can vary, but usually amount to approximately 5 % of the transaction. These fees are paid when the act of sale is signed in the notary’s office.

When you have found the apartment of your dreams, you sign a purchase agreement with the vendor, at which time it will be necessary to advance a 5 % or 10 % deposit (depending on the price of the apartment) that is retained by the notary until the act of sale is signed (approximately 3 months later).

When the act of sale is signed, a transfer tax amounting to 4.80 % of the value of the property must be paid. Various other costs related to the purchase of the property - mortgage fees (usual security in the event of resorting to a bank loan), notary fees and stamp duty - bring the taxes and administrative fees (more commonly improperly referred to as notary fees) paid at this time to between 7 % and 8 % of the purchase price.
They are fully borne by the buyer.

Ownership: what expenses and taxes are involved ?

Before buying an apartment, we make a detailed financial projection based on real running expenses (insurance, property tax, corporate body fees, cleaning, electricity, etc) and expected rental income in order to give you a clear view of your net return on investment which, in the example of a typical investment above, is 4 %.

When you rent your property, the revenue you receive as a non-resident is determined according to the same extremely favourable conditions that apply to residents and is declared on the same tax form (Declaration complémentaire des revenus n° 2042C) that must be submitted annually to the tax centre for non-residents at 9 rue d’Uzès, 75002 Paris, France. For revenue inferior to 76,300 euros/year, there is a 72 % deduction.

Example of tax on a typical rental revenue :

For a net annual rental revenue of € 30,000
The deduction of 72 % amounts to € 21,600
The taxable revenue is € 8,400
The net tax payable to the French government is € 8,400 x 5.5 % = € 462

Note : Furnished rentals are exempt from value added tax (VAT).

Tax on revenue in 2007

Example:

An apartment valued at €1,200,000 with a contingent loan of €300,000 euros that remains to be paid.
The net property value is € 900,000
The annual wealth tax payable is € 900,000 - € 750,000 = € 150,000 x 0.55 % = € 825.

Sale: what fees or taxes are involved ?

Should you wish to sell your property, the notary fees are not at your expense - they are the responsibility of the buyer. However, you will be liable to pay capital gain tax (27%) while you have owned the property for less than 15 years. Capital gain tax is calculated in the following way: sale price less acquisition price with a 10 % reduction per year from the 5th year plus a €1,000 fixed reduction. Thus, the longer you keep the property, the less tax you pay on resale and after 15 years there is no tax payable at all.

Example :

Acquisition price : € 300,000
Sale price : € 450,000
The capital gain is € 450,000 - € 300,000 = € 150,000
After 7 years ownership there is a reduction of (7 - 5) x 10% x € 150,000 = € 30,000
Fixed reduction of € 1,000
The net taxable capital gain is € 150,000 - € 30,000 - € 1,000 = € 119,000
The capital gain tax payable is € 119,000 x 27 % = € 32,130.

The notary who handles the sale is responsible for declaring the capital gain as well as collecting and forwarding the tax due to the tax department. In practice, the notary deducts the capital gain tax from the sale price that you receive on the day the act of sale is signed in his office.

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General Investment Conditions

Step 1 : You define your needs and expectations with the person who will accompany you throughout your search for a pied-à-terre in Paris. In this way, you establish a personal contact with the person who will advise you objectively on how to proceed with a methodical search adapted to the reality of the Parisian real estate market.

Step 2 : With no initial cost, you sign two documents that entrust us with our mission:
- a legal mandate (loi Hoguet) that allows us to begin searching for the apartment of your dreams*.
- a real estate investment advice contract** that defines our mission in terms of the services that we provide other than those involved in the search process itself.

Step 3 : We offer you a selection of properties corresponding to the research criteria you choose (budget, area, surface area, floor, elevator, etc).

Step 4 : You find the apartment of your dreams in our selection of properties. We put you in direct contact with the vendor or his/her representative and then assist you objectively in the negotiation process. Beyond the search, presentation of the vendor and price negotiation, our services include advice and step by step assistance throughout the acquisition process : financial projections, signing a letter of intent to purchase, opening a bank account in France, arranging a loan, signing the act of sale.

Step 5 : We renovate, decorate***, furnish and equip your apartment down to the finest detail (including electrical, telephone and internet connections), so that it is ready to be occupied.

Step 6 : You can choose to let us manage your pied-à-terre : we rent your apartment on a short-term basis while you are not using it yourself.

* You are billed on results : Paris-dream-apartments.com will receive its commission (called « honoraires de transaction ») only when the act of sale is signed at the notary’s office.

** Paris-dream-apartments.com will receive its commission (called « honoraires de conseil ») only after you are satisfied : when you sign a letter of intent to purchase at the notary’s office.

*** Paris-dream-apartments.com collaborates with competent professionals to renovate and decorate your pied-à-terre. We oversee the entire operation from A t Z and keep you informed of each stage of the project.

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