To sell real-estate property (Apartement, Villa, House)
The real estate purchase procedure in France
The first step when purchasing the real estate in France is drawing up of an official agreement between the seller and the buyer which is referred as Compromis de Vente at the notary. This document is obligatory for both parties. All conditions of sale, the price of the object, possible credits, etc, are described in the agreement. After the agreement is signed, the real estate to be bought is fixed after you. The buyer transfers the deposit in the amount of not less than 10% of the full cost of the real estate to be bought. The deposit is stored on the account of the notary till the transaction is finished. According to the French law, the buyer can cancel the transaction only within 7 days after the Compromis de Vente is signed otherwise the deposit vanishes. If the transaction is broken not on fault of the buyer, the deposit is returned.
Purchase of the real estate in France is carried out through the notary. The notary in France is the official state interests representative. His/her actions are strictly legalized by the Ministry of Justice. The notary confirms that the deal is accomplished in conformity with all legal norms. Besides financing transactions and mutual payments pass via the notary bank account. The notary should confirm the authenticity of the transaction. These investigations are held during 2-3 months after Compromis de Vente is signed. In the same period of time the buyer should complete the deal financing.
The following stage of the real estate purchasing legal registration is signing by the seller and the buyer of the Final Contract or Acte de Vente in the presence of the notary. The buyer is obliged to pay by this moment the remained part of the real estate cost to the notary who then pays it to the seller. This sum should be passed at the notary disposal after the notary confirms the readiness to signing. After Acte de Vente is signed, the notary assures the certificate of sale and property passes to the new owner. Having assured the certificate of sale, the notary record the new property owner during several days in a special register office. The new owner must insure the real estate.
Note : the buyer has to bear such additional expenditures as payment of tax for the property acquisition and registration (including the reward to the notary) that comprise usually about 7% of the cost. This sum is paid to the notary on the date of Acte de Vente.
Taxation of real estate in France
Real estate tax (taxe foncière) is paid by the owner of a real estate. Its rate is not fixed and varies depending on the type of the property and its location.
Habitation tax (taxe d'habitation) is paid by the resident, so if the real estate is rented for a moment, the lessee shall pay this tax, but if it is used for the habitation of owners, the owners shall pay. If the real estate is an apartment, you should count on 1.000 – 2.000€ per year, if it is a villa, from 4.000€ per year.
Property tax (impôt de solidarité sur le fortune) is paid by natural persons who possess the capital in France (real estate and bank account) overdrawing 750.000€. The rate of this tax is progressive from 0,55 to 1,8 % per year.
Profit resale tax (capital gains tax, la « plus-value ») is set proceeding from the difference between the price of resale of the property considering the charges of purchase and executed works. If the reasale of property takes place within the year after the first sale, this tax amount to 33,%, but it decreases every year.
AUSTERITY PROGRAM : Reform on the capital gains tax on property :
One of the first measures of the austerity program concerning taxation of the capital gains on property has been voted by the Deputies on September 07, 2011.
As an example, let’s take a real-estate property bought on August 14, 1996 as a buy-to-rent investment equivalent to 60 000 € and resold at 200 000 €.
Resold before February 01, 2012, total exemption from capital gains tax
Resold on February 02, 2012, taxable capital gains, with the allowances linked to the period of ownership*, will amount to 101 200 €. You will have to pay a tax of 32.5 %, i.e. 32 890 €.
This example shows that if you have to sell a property that is not you principal residence, it will have consequences for your assets.
To allow taking advantage of the current tax regime (total exemption after 15 years of ownership), the deadline date for a bill of sale has been fixed at February 01, 2012**. This restriction imposes, under consideration of time-to-market requirements, an immediate sale of property.
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There is no allowance for the first five years of ownership, between 6 and 30 years of ownership there will be progressive exemption finally reaching zero after 30 years:
- 2% allowance per year between six and seventeen years of ownership (i.e. 20% allowance after 15 years of ownership)
- 4% allowance per year between eighteen and twenty-four years of ownership (i.e. 36% allowance after 20 years of ownership)
- 8% allowance per year starting from 25 years of ownership (i.e. 60% allowance after 25 years of ownership)