Renting a Property in France – (part 5)
In part four of our property rental guide we looked at who is obligated to meet the cost of repairs, how to deal with disputes and the rules surrounding ending a tenancy. In Part five we’ll be taking a closer look at the property taxes payable on French properties.
The property taxes applicable to rental properties vary according to whether the property is a furnished let or unfurnished let.
When renting a furnished property in France there are three property taxes which the landlord may have to pay – Property Ownership Tax (taxe foncière), Local Business Rates (CET/contribution èconomique territorial) and Residence Tax (taxe d’habitation)
Property Ownership Tax
This tax must be paid by all property owners, although there are a few exceptions. If the local council approves it, owners of properties like guest houses are sometimes exempt from paying the tax on the rooms which are wholly used by guests.
In France a separate charge called the TEOM (or taxe d’enlèvement des ordures ménagères) is made on top of the property ownership tax and covers rubbish removal. Whether or not this charge is paid by the landlord or the tenant varies, so make sure it is stated clearly in your tenancy agreement.
In France property owners who rent out furnished accommodation on a regular basis must pay local business rates on the property – whether they are registered with the authorities as a professional landlord or not.
Business rates are charged on all properties which are clearly separate dwellings, but can also be applied to rented rooms if they are rented out frequently and are furnished.
There are some cases where a landlord might be exempt from paying business rates or can pay less, such as if the accommodation is only rented on a seasonal basis, if the property is let on a low rental basis, or if the property is in a rural development area and has been registered by the landlord as a new business. Cases are typically examined and assessed on an individual basis.
Local councils have the discretion to set a minimum rate level, but the figure is usually calculated by adding the rateable value of the property occupied by the business to the yearly wealth created by the business.
If a furnished rental property is used by a tenant as their main home they are liable to pay the residence tax, and it is not the responsibility of the landlord.
However, if the landlord is renting out rooms in their own home on an exclusive basis, they and the long-term tenant are both responsible for paying the residence tax.
Owners of certain types of property (such as guest houses) may be exempt from paying residence tax, but this must be taken up with the local council.
After a tenant leaves a property the landlord must ascertain whether they paid their most recent residence tax bill. If the landlord cannot confirm that the tenant paid the latest residence tax bill within a month of the tenant moving out the landlord must inform the tax authority.
In some cases the landlord can be made to pay the outstanding residence tax bill, although this usually only occurs in cases where the tax authority has already started collection procedures.
Note: If the furnished accommodation is a holiday let landlords must also apply a taxe de sèjour (which literally translates as luxury living tax) to their rates. The guests are responsible for paying this additional amount.
In the case of unfurnished properties, the landlord is responsible for paying the local property rates but the tenant is responsible for paying the residence tax (as long as they were occupying the property on January 1st.
A separate charge is issued for rubbish removal and is generally taken with the property ownership tax. Whether the tenant or landlord meets this charge is up to the individuals involved.
Business rates are not charged on unfurnished properties.
In part six of our French property rental guide we’ll discuss the best ways of tracking down a suitable French rental property and, for those who already own a French property, we’ll also cover how to go about finding a tenant.