Three things to ask your accountant before buying a house in France

Only a short train journey and ferry ride away, France is a great place to visit. But for those who want to make France a permanent home or buy a house in France to let, there are a number of tax issues to consider. We take a look at the three most important things you should ask your accountant before purchasing your French abode.

1. Will my Residence status change?If you don’t plan to move permanently abroad and want to remain living in the UK, then your residence status is not likely to change. However, if France does become your permanent home, then HM Revenue & Customs will probably view your residence status in the UK as “non-resident” or “not-ordinarily” resident. This can affect what UK tax you pay so it is important you know what your residence status is.
2. I’m buying a property to let; what tax will I need to pay?You will need to complete a French Tax Return as well a UK Tax Return if you remain resident in the UK and you will be liable for any rental income or Capital Gains Tax in both countries. In your UK Tax Return, you can deduct foreign tax paid but you will have to make up the difference if the tax paid in France is lower than what you would pay in the UK. There is an annual wealth tax payable in France but if you are resident in the UK, then it only applies to French assets. The tax starts on total wealth of 720,000 euros and has a top rate of 1.8%.
3. Are French Inheritance Tax laws different? Unlike in the UK where we can freely distribute our assets as we like upon writing of a will, in France, it is much different. There, it is the location of the property that counts, not the residence status of the owner.  There is a strict order in which assets are passed and it is as follows:
   • Children (or if deceased, their children)
   • Parents and privileged collateral heirs e.g. siblings (or if deceased, nephews and nieces)
   • Grandparents
   • Surviving spouse
   • Other collateral heirs (cousins, uncles and aunts etc)

   This order is obviously not very beneficial to the surviving spouse and you should always seek legal advice in this area because it is possible to apply for a French will to be made which, in some instances, can improve the situation for the surviving spouse.  Inheritance Tax in France is progressive and is charged at the top rate of 40% for assets worth over £1million.

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