When acquiring a property, it is essential to determine the type of investment you are looking for. This will define the applicable taxation as well as the appropriate structure.
Step 1: PURCHASE OFFER
At this stage, you must focus on the legal aspects of your investment with your notary.
Step 2: PRELIMINARY SALES AGREEMENT
Payment of 5 to 10% of the purchase price.
Step 3: COOLING-OFF PERIOD
The buyer has the right to withdraw from the sale without paying compensation (10 days).
Step 4: OBTAINING A BANK LOAN
(if required)
Step 5: SIGNING OF THE DEED OF SALE
Before a notary, payment of the purchase price and handover of the keys (within approximately 2 months or more).
Note: A French notary is mandatory in France for property acquisition, and a preliminary legal review may be required depending on your project.
REGISTRATION DUTIES
Any real estate located in France is subject to registration duties, regardless of the buyer’s status. This means that anyone acquiring property in France, whether resident or non-resident, is subject to these duties. Applicable rates are approximately 5.9%, and 5% in the case of share transfers in real estate-rich companies (French or foreign) holding predominantly French property. Other situations may apply under certain conditions.
VALUE ADDED TAX (VAT)
VAT must be paid on transactions carried out by taxable persons within the scope of their economic activity.
For example, developers, property dealers, and house builders must declare VAT.
Acquisitions of new and old buildings are treated differently under the law. VAT exemption applies to sales of buildings completed more than five years ago, while sales of buildings completed less than five years ago are subject to VAT at a rate of 20% (to be assessed on a case-by-case basis).
OTHER COSTS
Notary and registration fees are fully borne by the buyer. Notary fees amount to approximately 0.825% plus VAT, calculated on the purchase price. If the acquisition is financed through a loan secured by a mortgage, additional fees apply, amounting to approximately 0.55% plus VAT of the secured amounts.
Most common scenario:
Total costs represent around 7% of the purchase price. Additional costs may include translation of supporting documents and/or technical diagnostics. A detailed estimate should be requested from the notary.
STRUCTURING OPTIONS
DIRECT PROPERTY ACQUISITION
A property is considered “direct ownership” when an individual purchases real estate without an intermediary structure. In this case, French law grants ownership in its most absolute form (right of use and enjoyment of the asset).
There are different types of ownership: full ownership, co-ownership units, and volume ownership. Despite unlimited liability and the possibility of offsetting losses related to the property, direct ownership offers flexibility, as the owner may later transfer the asset into a partnership or corporate structure with tax deferral.
In contrast, a property held through a company cannot be transferred back to an individual with tax deferral. The property may be rented furnished or unfurnished, and remains (unless otherwise elected) subject to personal income tax.
INDIRECT PROPERTY ACQUISITION
French SCI and Monegasque SCP
French SCI and Monegasque SCP structures are commonly used for owning and managing property in France. The Monegasque SCP offers a similar regime to the French SCI. As a civil company, it is not a commercial structure.
The SCI is a “transparent” structure, meaning shareholders are taxed as individuals. By default, it is subject to income tax (with some cases subject to corporate tax). Taxation applies only to rental income generated and declared by the partners in proportion to their shares.
Buyers choose SCI structures for several advantages: facilitating joint ownership (family or investors), easing property transfer, and reducing inheritance tax exposure under French law.
Foreign Commercial Companies
There is no legal obstacle preventing a foreign commercial company from acquiring property in France.
However, several tax obligations apply:
Territorial principle: full French corporate tax applies, with a standard rate of 25% in subsequent years.
Accounting rules: mandatory bookkeeping and annual corporate tax filing in France.
3% tax rule:
Rental income or deemed rental value must be recorded in French accounts to avoid significant tax risk.
Taxation can be complex and may lead to disputes. Generally, when a foreign company carries out regular activity in France, income derived from French property must be included in the taxable base in France, regardless of property use.
USEFUL INFORMATION
Do I need to keep accounting records? Owners of a French or Monegasque SCI often wonder whether accounting is required.
The answer is “yes” in the following cases:
- Option for corporate tax regime
- Partner subject to BIC or corporate taxation regime
- VAT-liable activity
- Provided for in the SCI bylaws
- Required for IFI valuation purposes
However, accounting is strongly recommended for capital gains calculations, valuation of shares for gift/succession purposes, and other tax considerations.
WARNING
Abuse of rights
Some arrangements may have benefited from tax advantages. Where a foreign company structure is used purely for tax purposes to avoid French taxation, the tax authorities may initiate an abuse of rights procedure.
OWNERSHIP STRUCTURE
The choice of an appropriate structure for acquiring property in France must be assessed on a case-by-case basis. It depends on the buyer’s personal situation (finances, family, nationality, country of residence) and the type of property (residential, rental, furnished or not). Professional advice is strongly recommended due to the legal and tax implications. Other structuring models exist but are not covered here.
Real estate acquisition: costs, legal and tax structuring choices
When acquiring a property, it is essential to determine the type of investment you are seeking. This will define the applicable tax regime as well as the most appropriate legal structure.
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Taxes related to property ownership
Several taxes are payable each year by property owners: property tax, residence tax, business property tax (CFE), rental income contribution (CRL), etc.
Our firm advises you on your obligations and the key deadlines not to miss.
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Taxation of rental income
Residents and non-residents are subject to specific tax rules on rental income earned in France.
Discover the applicable tax regimes according to your situation and the type of rental activity.
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Real estate wealth tax (IFI)
The Real Estate Wealth Tax (IFI) applies to individuals holding significant real estate assets in France.
Find out who is concerned, which assets are taxable, and which liabilities may be deducted.
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Real estate capital gains tax
Selling a property in France often results in taxation on the capital gain.
Depending on your situation (holding period, tax residency, type of property), exemptions or reductions may apply. It is important to fully understand these rules in order to optimize your tax position.
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Transmission de votre patrimoine : droits de succession
The transfer of real estate in France is subject to inheritance tax, with allowances and rates varying depending on the family relationship. Whether the property is held directly or through a company, taxation may also depend on international tax treaties.
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