For a regular freehold residential property.
An agreement to buy is negotiated between the buyer and seller and an initial contract is drawn up by the Real Estate Agent or a Notary and signed by the buyer and seller which legally bind both parties.
You would now pay a deposit of about 10% of the purchase price which remains held in a special account by the Notary or selling agent until completion of the sale when the property will no longer be open to offers from other parties. This contract is known as a bilateral agreement, compromis de vente in French, and the most popular type of contract. You would lose the deposit if you do not proceed with the purchase.
The final contract is signed at the Notary’s office and the deeds pass to the buyer and the land registered. You must then pay the balance of the purchase price to the Notary who will then pay the vendor. You will also need to provide the Notary a copy of your birth certificate translated into French and, if applicable, a copy of a Marriage Certificate, also translated.
A solicitor/lawyer is recommended to protect your interests and conveyance the property title when buying real estate in France. They will be in addition to the Notary who is mandatory for property transactions.
You would expect to pay a total of over 12% of the selling price; less for properties under five years which have VAT (20.6%) built into the price.
The Notary fee would be around 3%, transfer tax 7.5% (less than 1% for new properties) and registration fees around another 6%.
The vendor should pay the Real Estate Agents fees.
Property Tax in France
Real Estate taxes are levied on property plus residential tax for living as an owner occupier or as a tenant (renting or not). Both are calculated on the average property rental values.
Under the double tax treaty with France, if you are tax resident in a country that has entered into such an agreement with France, the agreement allows you to credit any capital gains tax paid in France against any capital gains tax payable in your tax domiciled country. Generally, Capital Gains Tax is payable by second or holiday home owners when the property is sold unless you have owned the property for 32 years or longer. Calculating whether there has been a capital gain involves deducting the purchase price plus 10% from the sale proceeds, less agent’s commission and legal costs. It is also possible to deduct the costs of renovating your home provided you have kept proper receipts which must include VAT. The longer you have owned your property the less you pay until you reach 32 years where it dwindles to nil. Try not to sell in less than 2 years as you will not be allowed to claim any of the special allowances. There are exceptions such as pressing family reasons – e.g. death. If your holiday home becomes you permanent home CGT will not be payable after 5 years of residence for at least 8 months in each year. The rate of tax is 33.3%. If you make a `habit’ of buying, renovating and selling, the tax authorities will suspect that you are a property dealer and charge a rate of 50%!