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Local
Taxes
General
introduction:
There
are two types of local taxes in
France
: land tax (‘taxe foncière’) and occupancy tax
(‘taxe d’habitation’). The
point of reference for each tax is the first of January each year.
The tax period is a calendar year and the bills are usually sent
out in September/October for that year.
They are calculated in accordance with the notional rental value of
the property and/or land and the rates are set at a local, regional and
national level.
Position
when purchasing:
When
purchasing real property in
France
, the land tax will be divided pro rata temporis
between vendor and purchaser on the basis of the completion date of the
transaction. Normally, the
vendor will receive the bill for that year and will then contact the
purchaser to obtain his or her share.
The occupancy tax is always the liability of the occupier/owner on
1st January for the entire year and is never shared.
Liability
for occupancy tax:
This
tax is paid by the occupier on the 1st of January.
Therefore, if there is a tenant he or she is liable to pay it.
There is a common myth that if a property is a second home and is
not rented out, there is no liability for occupancy tax.
This is not the case and, unless one of the exonerations can be
claimed (e.g. that there is no furniture in the property permitting
effective habitation), one is liable to pay this tax and will need to
obtain the requisite form to complete from the local tax office (there is
no form for land tax which is why occupancy tax can be overlooked).
Address
for billing:
When
one completes a transaction with a notaire, the address given is that of
the current residence of the purchaser.
It may be the case that the new residence will be the property
purchased either immediately or shortly afterwards.
This can potentially cause a major problem in relation to the local
taxes. We have experienced
this problem personally and have also heard about a number of clients and
friends having the same difficulty. The
problem is as follows: once the change of ownership is recorded by the
local tax office (who are notified of this automatically when the deed of
completion is registered), the old address outside of
France
is retained by them.
Subsequent bills and correspondence are then sent to the old
address (often well over a year after the original transaction).
In
our situation, concerned that we had not received our bill when due, we
contacted our local tax office (for these purposes, the ‘trésor
public’ of the commune) by telephone and were reassured that there was
not a problem. They then
telephoned us at the property (!) to appraise us that they were about to
issue proceedings for recovery against us (despite us having made tax
returns in France, albeit to a different office, as well as having our
resident’s permit and being in regular contact with the local ‘mairie’).
Apparently, a summons had been issued to us in the
UK
, though there could have been no proof of us receiving
it as we had not been at that address for about a year and a half (so the
correspondence must have either been returned, thrown away by the new
owners or disappeared into a postal black hole).
Fortunately, we managed to settle the issue before it went any
further and successfully resisted a claim for penalty interest and costs.
However, friends and clients have not been so fortunate and have
had their bank accounts in France frozen without being aware of any issue
(the local tax office having the power to do this without showing evidence
of adequate notification to the account holders).
Not only does this cause distress and hassle but there is a charge
connected to lifting the freeze on the account and penalty interest and
costs will generally be successfully recovered.
We
therefore suggest that every person who is purchasing and then moving to
France
permanently writes to inform the local ‘trésor
public’ (preferably by recorded delivery letter) of their new address
for the purposes of the local taxes. Even
if the notaire is amenable to recording the exact situation in relation to
the purchaser’s addresses in the act, we would still advise erring on
the side of caution. As
experienced in our case, relying on a telephone call and assuming that
there is sufficient evidence to show where one is in fact resident is not
sufficient!
08/09/2004
- Issue of the week
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