Guide to buying property in. France

Guide to buying property in France France France The Residential property purchase procedure in France 3 The Purchase Process in France 4 The...
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Guide to buying property in

France

France

France

The Residential property purchase procedure in France

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The Purchase Process in France

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The Residential property purchase procedure in France

Capital Gains Tax (CGT), Taper Relief, Social Tax and Surtax

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Buying property in France should be relatively straightforward, but we

Knight Frank’s Network of Agents in France

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would always recommend that you instruct the services of a reputable

Contacts

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Contents

agent, lawyer and Notary. This document has been compiled as a guide for potential purchasers of property in France. It does not seek to provide or replace legal and fiscal advice which you should obtain, nor is it intended to have any contractual value.

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Guide to buying property in France

Guide to buying property in France

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France

France

The Purchase Process in France The Notary Having identified the right property and agreed the terms and conditions of sale, the buyer and seller will need to instruct a Notary. The Notary is nominated by the state and as such is an impartial advisor. The Notary’s role is to ensure the letter of the law is applied and that the interests of both parties, relating to the sale and purchase are protected. The Notary will undertake the relevant searches and highlight any liens, right of ways, planning discrepancies and so forth as appropriate. Due to the Notary’s mandate and impartiality it is not uncommon for one to act for both parties. This is not mandatory and either party may select their own representative independently.

Offre d’achat or Offer Letter In certain circumstances the buyer may be asked to confirm their intention to purchase in writing. This may take the shape of an ‘offer letter’ or ‘offre d’achat’ outlining the purchase price and a lock out date by which the purchaser endeavours to move toward exchange. The offer letter is countersigned by the vendor confirming the price and the period of exclusivity the buyer is granted in which to proceed. The countersigned document binds the vendor to the terms stated therein and also precludes the vendor from entering into any other sale agreement during the aforementioned period of exclusivity. During this period the buyer will meet a Notary, discuss the proposed terms and any conditions of sale which will be summarised and included within a ‘Compromis de Vente’. Whether you’re a buyer or seller it is recommendable to seek a Notary’s opinion or independent legal advice before entering into any form of written agreement. Whilst the buying process is relatively straightforward the assistance brought by a Notary at the early stages of a deal is invaluable in ensuring a smooth and risk free transaction.

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Guide to buying property in France

Compromis de Vente or Purchase Contract With everything agreed the Notary prepares the ‘Purchase Contract’ or ‘Compromis de Vente’. This will provide a completion date, typically a 3 month period, to allow the Notary to conduct relevant searches, gather the various mandatory technical reports including asbestos, termites, lead, energy efficiency graphs and so forth. Moreover, the ‘Compromis’ will refer to conditions precedent that unless satisfied will allow the buyer to withdraw within a fixed period. The conditions may include finance, physical modifications, planning matters to name but a few. The resolution of the said clauses is mandatory and form an important part of the ‘Compromis’ – failure to fulfil all of these will allow the buyer to exit the purchase with no penalties and a full refund. The ‘Compromis de Vente’ or ‘Purchase Contract’ is typically accompanied by a 5 or 10% deposit; these funds should be entrusted to the Notary. Once the document is signed by both parties the buyer is entitled to a 7 day cooling off period. This forms part of the consumer protection legislation in France and gives the buyer the right to withdraw at any stage within those 7 days without penalty or justification.

Acte de Vente or Completion Completion of the sale takes place at the Notary’s office with payment of the purchase balance, Notary’s fees, land registration costs, agency fees and transfer taxes all due at this stage. Whilst the fees and costs may vary slightly, the estimated percentage cost of a typical purchase in France is approximately 7% of the purchase price.

Once funds are transferred and the ‘Acte de Vente’ is signed the Notary will register the new owner and any mortgage against the title. The vendor may be liable for Capital Gains Tax (CGT) and should be aware of these liabilities before entering into an agreement. The tax landscape in France is changing but set out below is the current structure and treatment of property gains in France.

Other considerations A property may be acquired and held in a private name, however it is important to note that French tax, succession and CGT may impact on the way a property is best held. It is strongly recommended that you seek the appropriate independent legal and fiscal advice in order to structure the deal in the most efficient way possible.

Wealth Tax The Finance Law of 2013 introduced some modifications to the way an individual’s assets are treated in France. Wealth Tax applies where net asset values exceed €1,3m and calculated retrospectively from €800,000 as per table below. Net asset value

Tax rate

Up to €1,300,000

0%

€800,000 to €1,300,000

0.5%

€1,300,000 to €2,570,000

0.7%

€2,570,000 to €5,000,000

1%

€5,000,000 to €10,000,000 Over €10,000,000

1.25% 1.5%

It is worth pointing out, that some of the countries that share a dual tax agreement with France may have a higher/lower domestic CGT rate. In practice, this may mean an adjustment payment upon the repatriation of any gains is due.

Capital Gains tax (CGT), Taper Relief, Social Tax and Surtax CGT The base rate from which French CGT is calculated is determined by one’s place of residence. There are 3 broad categories and starting rates: 19% for EU members 33.3% non EU members 50% so called ‘uncooperative’ nation states.

Taper Relief To dissuade speculation and encourage long term ownership, France applies a Taper Relief of up to 100% on CGT over 22 years.

Social Tax is also applied on top of any income tax derived from the rental of a property in France. The Social Tax is seen as an ‘extraordinary’ tax implemented during periods of crisis which by its very nature may be interpreted as temporary.

Supplementary Tax In addition to CGT a supplementary tax has been introduced for any gains in excess of €50,000. There are 5 brackets: From €50,000 to €100,000

2%

Social Tax

From €100,001 to €150,000

3%

The adoption of the social levy has been introduced and was voted in by Parliament in July 2012. The ‘Social Tax’ of 15.5% now applies in addition to the CGT bands above, and is due by non-French tax residents upon the disposal of real estate assets or shares of a property holding company. The levy is applied after Taper Relief as per the examples below.

From €150,001 to €200,000

4%

From €200,001 to €250,000

5%

Above €250,001

6%

Discount To accompany these changes and to encourage sales activity in the market, an amnesty is being extended offering a 25% discount on all property related CGT bills until August 2014. If successful the relief may be extended beyond this date. The discount is applied after Taper Relief and before Social Tax.

Guide to buying property in France

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France

France

 Knight Frank Network in France City

Paris

Evian

 Morzine  Chamonix Megève  Dordogne

Meribel

 

Gascony

  

Provence

Within our French Network we try to offer our clients the most comprehensive service that we can. Through our growing Network of associate offices throughout France, working alongside Knight Frank in London, we will endeavour to find you the right property.

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Guide to buying property in France

Throughout Knight Frank’s French network it is our intention to provide all our clients with the most comprehensive level of service and care. Working alongside our growing network of Associates in France, Knight Frank’s dedicated London team will endeavour to find you the right property in the right area. All local Network offices are well established and locally owned businesses trading under strict French real estate laws. Local agency agreements and other contractual agreements are governed by French law.

We will also help with the following: wwPut you in touch with possible legal, survey, planning and tax advisory firms that can assist you with due diligence, general advice and completing the transaction. None of our agents are qualified to give you legal, survey, planning or tax advice, although they are happy to share with you their years of experience.

 Monaco Mougins 

Valbonne

Grimaud

Knight Frank’s Network of Agents in France

Courchevel  Val  d’Isere

Cannes  St Tropez

wwPrepare a purchase contract to pass to the legal teams outlining the terms of the deal and the professionals involved. At all times during the purchase process, we are available to assist with effective communication between the parties involved. Note: This publication is meant to give a very basic indication of the purchasing process. No liability is assumed as each interested person should seek local professional advice.

Guide to buying property in France

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contacts Mark Harvey Head of French Residential Network T +44 20 7861 5034 E [email protected] Matthew Hodder-Williams South West France and The Alps T +44 20 7861 1529 E [email protected] Edward de Mallet Morgan Cote d’Azur and Paris T +44 20 7861 1553 E [email protected] Fred Schiff Cote d’Azur and The Alps T +44 20 7861 5120 E [email protected] Jack Harris Cote d’Azur and Provence T +44 20 7861 1139 E [email protected]

@KFInternational EstateNetPrestige.com

1. No reliance on contents: This is only a guide to the buying process in France. It is not definitive and is not intended to give advice. It must not be relied upon in any way. So far as applicable laws allow, no responsibility or liability whatsoever will be accepted for any errors or for any loss or damage resulting from any use of or reference to the contents. As a general overview prepared using information from French lawyers, this guide does not necessarily represent the view of Knight Frank in any respect. 2. Independent advice: You must take specific independent advice from your professional advisers in all cases. In preparing this guide, we do not imply or establish any advisory or professional relationship. We do not have any relevant authorisation from the Financial Services Authority to undertake regulated activities. 3. Intellectual property: © Knight Frank LLP 2013. All rights reserved. Copying, modification or reproduction of this review in whole or in part is not permitted without the prior written approval of Knight Frank LLP. 4. General: Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London W1U 8AN, where you may look at a list of members’ names. 5. Members of the Knight Frank Global Network: References to Knight Frank may be to, or include, any Member of the Knight Frank Global Network. Those Members are Knight Frank LLP and its direct subsidiaries which provide services in the UK and an international network of separate, distinct and independent entities or practices which provide services internationally. No Member has any authority to bind or represent any other Member. No Member operating under the name of Knight Frank (including Knight Frank LLP) is liable for the acts or omissions of any other Member.

3155JAN14

Important Notice