Q: If I buy off-plan in France, how can I be sure that my money is safe and that the property will be completely finished even if the developer goes bankrupt?
A: In France, it is a legal requirement for the developer to pay for a financial guarantee with a large bank or insurance company before the notaire will allow any sales to complete or any money to be transferred to the developer. The buyer’s deposit is also held securely on a protected client account with the notaire so that they can ensure all conveyancing and checks are carried out before the sale can complete. France is the only country in the world that insists on this, making buying off-plan here very safe indeed. The build completion guarantee therefore ensures that your property will be finished and to spec regardless of what happens to the developer or contractors. View this article on the benefits of buying off-plan in France to understand the other benefits.
Q: What happens if I reserve and pay a deposit but then I fail to obtain the mortgage I needed?
A: In France, when you sign a reservation contract, you are always asked if you need a French mortgage. If so, then the amount required and the interest rate is indicated in the contract, so that if for some reason you fail to obtain the mortgage required then your deposit is refunded in full by the notaire. At Avecoeur we always suggest that a potential buyer completes a 10 minute mortgage application form with us before they sign any reservation contracts and even before any viewing trips are arranged. This way, our in house mortgage brokers can tell you know exactly how much you are able to borrow before any time is wasted trying to buy something that is financially out of reach.
Q: Do I need to appoint my own solicitor or legal advisor when buying a new property in France?
A: France has a different legal system to the UK and many other parts of the world and is based on the Napoleonic code. Under this system it is only the notaire, who is an appointed state official, who can legally complete a property transaction in France, perform conveyancing and collect any sales taxes linked to the purchase. They are completely independent from both the buyer and the seller and cannot be “in-house” for a property developer. Therefore, if a notaire is proposed by a developer, because they have a working relationship with them or because this notaire has the complete information required on a particular development, then it is this same notaire who will hold the buyer’s deposit and answer any questions the buyer may have. Because of this unbiased approach it is therefore not necessary to appoint, for example, if you lived in the UK, a UK based solicitor to represent you in the transaction since the notaire is the person who will represent both the buyer and the vendor. In some circumstances, where the buyer has bought property in France before and uses a particular notaire and wants to use them again, then the notaires are able to work together to complete the purchase, in which case they will share the fees.
Q: Can I buy a French property but put it in my children’s name?
A: Yes, you can do so but bear in mind that if it is in your children’s name and they are under 18 years of age then you won’t be able to get a mortgage as the guarantor of the mortgage must also be the owner. Once they are over 18 years of age their financial situation will be considered as part of the mortgage application.
Q: Can I buy a French property using a non-French company?
A: Yes, you can do so but you will lose any tax advantages that were available to you as an individual or as a French company, so financially it is usually not the best option. You also cannot obtain a French mortgage through a non-French company.
Q: Is it worth me creating a French company to own the property in France?
A: This depends on your personal and financial circumstances and also on the price of the French property you wish to purchase. It can sometimes be advantageous from a tax point of view to do it this way but due to the set up cost and then ongoing accountancy fees, it is usually only worthwhile for more expensive properties and where you are earning a rental income from it. It is also a way to donate shares in the company to your family members in order to reduce or remove any inheritance tax due on your passing.
Q: What sort of French company structure is best for my property purchase in France?
A: The two most popular company structures for buying property in France are an SCI and a SARL de Famille. Which one you should choose depends on whether or not you want to rent it out as a furnished let or not. If you only want to rent it out unfurnished or don’t want to rent it at all then an SCI structure is typically the most suitable. On the other hand, if you are planning to rent it out furnished for short lets and to claim the VAT back on the purchase price then a SARL de Famille is most suitable since you are not allowed to rent out a furnished let through an SCI and so you also wouldn’t be able to reclaim the VAT.
Q: If I am earning rental income in France, where any tax due is calculated and paid in France, do I also have to pay tax on the rental income in my country of residence if I do not live in France?
A: France has a double tax treaty with most developed countries around the world such that you only ever pay the difference between what you have paid in France and the tax due in your home country (if your home country has a higher tax rate). You would not pay tax in France and again the full rate back in your home country; you would only pay the difference between the two. In the situation that the tax rate in France is higher than your home country then you would pay no additional income tax in your home country. As there are a number of tax benefits when buying property in France, which often means the tax paid in France is very low or even zero, it means the tax due in your own country will often be higher. There are ways to reduce this tax by setting up a French company, for example, to buy a French property such as a “SARL de Famille” where you only pay tax in your own country on the taxable profit of the French company. Again, due to the significant tax advantages available on certain property purchases in France you may well pay very little or zero tax on your profits both in France and at home, however you should check with your financial advisor as to the tax implications in your country of residence before making any decisions.
Q: Under what circumstances can I expect to pay zero or very little tax on my rental income in France?
A: In order to encourage the construction and rental of properties in France on a short term basis, the French government allows a property buyer (whether a resident or non-resident in France) to offset his rental income with all costs associated with the running and maintenance of the property plus the mortgage interest and also the amortization of the property (about 3% per year over 30 years). As such, zero or very little income tax is due. To qualify for this you must buy a new property from a developer and then sign a rental management mandate with a registered, professional management company in France providing hotel services and rent it out for at least a few weeks each year. Under these circumstances you also benefit from a full rebate of the VAT included in the price (which at the time of writing is 20%) which is a huge saving (see separate article on how to pay zero tax on French property).
Q: Do all new properties in France include VAT and can I always get the VAT back?
A: Yes, all new properties in France include VAT even though it is usually not mentioned since for most purchasers (an owner-occupier or landlord renting out on a long term basis) as they do not benefit from these tax advantages. For old, existing properties, they were all new when they were built of course, so VAT was included but if they are not bought from a developer then you cannot get it back unfortunately (see separate article on the requirements for getting a VAT rebate).
Q: Are there any other taxes to pay?
A: Yes, capital gains tax which diminishes for each year of ownership from year 10 to 30 until it reaches zero, inheritance tax, and wealth tax for properties above with a NET value of 1.3m Euros or above. You will also have to pay Taxe fonciere and Taxe d’habitacion in France that are on going yearly property taxes associated with paying for the cost of services in your local commune.
Q: Can anyone in the world buy property in France?
A: Yes, except for a handful of blacklisted countries, anyone is allowed to own property in France. See the article on the Avecoeur buying process for more information on the various steps involved when buying through Avecoeur.
Q: Do I automatically get a residency visa when I buy a French property?
A: No, unfortunately this is not the case in France. Since it already has a thriving a economy (6th largest in the world) and plenty of inward investment it does not need to offer residency visas in return for buying a property like some countries do.
Q: What happens if I initially want to rent my property out through Avecoeur but then after a few years decide I don’t want to anymore?
A: This is fine. You just need to give the notice indicated in the rental mandate and the contract will cease on that date. If you elected to have your VAT rebated though you will have to pay back a portion of your VAT pro-rata (see article on requirements for obtaining the VAT rebate).
Q: Can I personalise my apartment, chalet or villa when I buy off-plan?
A: Yes, you will be given a wide selection of interior fixtures and fittings to choose from, from bathroom and floor tiles, to taps, door handles and showers and you can even choose colours for your walls. Depending on how early in the build process you reserve your property, you can usually also modify the interior layout of your home.
Q: Who will deal with installing the kitchen, furniture and equipment in the property once the sale has completed?
A: As a 360 degree property company, Avecoeur can deal with selecting and installing your kitchen, creating a bespoke furniture pack, decorating your property in the style you want and generally making sure it is completely ready for you to move into or rent out (see article for services for property owners).
Q: Do I need to travel to the property myself to do the snagging list?
A: No, Avecoeur can provide this service on your behalf and where we are the developer ourselves this service is free of charge. If you buy a development we represent but is not our own development then there is an extra charge for this. Doing a thorough snagging list and following up on these is important to ensure the property is finished exactly how you like it and to the high quality level that you and renters (if renting) will expect.
Q: Do I need to travel to France to purchase a French property?
A: If you don’t have the time to come to France for either the viewing, signing of contracts or even the sale then this is absolutely fine and many people do this. Videos, 3D models, plans, google earth and online research gives you all the information you need to make a property purchase decision if you are short of time to travel. In addition most contracts can now be signed electronically and you can give the notaire the power of attorney in order for them to complete the sale on your behalf so you never need to travel to France to make a property investment such as this.
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