Purchasing a Holiday Home in France: What Should You Consider?

1. Costs associated with the purchase

When purchasing a property in France, you will not only pay the purchase price but also additional costs such as:

• Transfer tax (droits de mutation): Usually 5.80% of the purchase price. In some departments, this will increase to 5.30% from April 2025.
• Notary fees: Including land registry registration and administrative costs.
• Potential VAT: For new-build properties, no transfer tax applies, but VAT at 20% is due.

For example, if you purchase a property in the VAR department for €500,000 (of which €15,000 is for furnishings), additional costs could amount to €35,500. This includes €28,162 in transfer tax, notary fees, and a €485 contribution for publication with the mortgage registry.

2. Permits and registration for rental

Do you intend to rent out your holiday home? Then you must take the following into account:

• Local permit requirements: In some areas, a rental permit is mandatory.
• Registration number (numéro d’enregistrement): Required for rentals via online platforms.
• Tourist tax: Depending on the municipality, you must collect and remit tourist tax.

3. Tax aspects of renting out

If you rent out your holiday home, different tax regimes apply:

• Actual expenses method: Here, real expenses (such as maintenance, taxes, interest, and depreciation) are deducted from rental income.
• Micro-enterprise regime: This applies a fixed-cost deduction, depending on the classification of your property:
• Without "meublé de tourisme" classification: Maximum turnover of €15,000 with a 30% flat-rate deduction.
• With "meublé de tourisme" classification: Maximum turnover of €77,700 with a 50% flat-rate deduction.

For a property classified as "meublé de tourisme" with rental income of €22,000, the micro-enterprise regime results in a tax burden of €3,025 (20% income tax and 7.5% social contributions if the owner is covered by another EU social security system. Otherwise, the total social contribution is 17.20%). However, if you opt for the actual expenses method, real costs may result in a more favourable tax outcome.

New-build properties: If a newly built property is purchased with 20% VAT and is used for furnished holiday rental with additional hotel services (at least three of the following: regular cleaning, provision of linen, reception service, breakfast), a request for VAT reimbursement can be submitted to the French tax authorities.

Conclusion

Buying a holiday home in France offers numerous benefits, but it is essential to be well-prepared for the tax and administrative obligations. Consider in advance the costs, rental regulations, and the tax regime that best suits your situation.

Would you like professional advice on your purchase and rental strategy? RFN is ready to assist you with the legal and tax aspects of your investment.