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French taxman launches crackdown on undeclared property extensions

French tax authorities are planning a crackdown on people who do not declare improvement to their homes such as extensions and swimming pools, by using aerial photos of property.

The French tax service has fixed its eyes on verandas and home extensions, with the hopes of locating those who failed to declare any new, permanent changes to their property to the tax authorities. 

The DGFiP – the Public Finances Directorate General in France – recently announced its intention to extend the use its artificial intelligence tool, originally intended to locate undeclared swimming pools, for seeking out undeclared home extensions as well. 

In France, the property owners’ tax taxe foncière is linked to home value, so any “permanent” changes that increase property value must be declared. For pools, property owners must declare the installation of a permanent in-ground swimming pool within 90 days of construction.

Officially, tax authorities refer to something as being permanent if it is fixed to the ground with “large screws or cement.” This basically means that if you cannot pack up the deck or pool at the end of the season, then it could be considered as part of your property taxes for increasing the value of your home.

READ MORE: Everything you need know about installing a swimming pool at your French property

The software, which was created by Google and the French IT company, Capgemini, was developed at the behest of French tax authorities.

Essentially, the tool uses “aerial photographs taken by the National Institute of Geographic and Forestry Information (IGN)” to increase the accuracy of “direct local taxation,” explained a spokesperson from the DGFip to French daily Le Parisien at the start of the project.

Originally, it was tested out in nine départements across France in 2021: Alpes-Maritimes, Var, Bouches-du-Rhône, Ardèche, Rhône, Haute-Savoie, Vendée, Maine-et-Loire and Morbihan. The experiment helped locate hundreds of undeclared swimming pools and allowed tax authorities to levy over €10 million in increased tax revenue, as shown in the graphic below. 

At the start of the project, a spokesperson for the DGFiP told Le Parisien that they hope to extend the software to “the entire metropolitan territory in 2022.” 

Now, they are hoping to further widen the scope of the technology so that it can also locate verandas and home extensions. 

However, the project has received some backlash for having a high rate of errors. Philippe Laget, a worker a the Public Finances office in Bouches-du-Rhône noted to Le Parisien that his département had error rates of about 30 percent, “which will lead to the taxation of certain pools that should not have been taxed, or even to tax adjustments.”

This was often due to the software mistaking non-permanent installations or above-ground pools for permanent ones. 

The experimental round of the software simply informed property-owners that an undeclared swimming pool had been located on their property, and asked them to respond by providing details such as the time of construction and size of the pool.

READ MORE: Reader question: How can I challenge my French tax bill?

The director of the DGFiP assured Le Parisien that before the technology is extended, they will “need to be sure” that the software will be able to decipher between home extensions and other outdoor structures such as dog houses or kids’ backyard forts. Tax agents are also hopeful that the software will allow them to locate abandoned buildings so that taxpayers are not unnecessarily taxed for vacant, derelict structures on their properties.

A report at the end of the 2021 project found that 94 percent of those who received this letter did indeed “confirm the taxable character of their swimming pool,” though local tax agents also noted an increase in complaints after tax notices were sent in August. Property-owners can contest the results of the software by sending photographs or requesting that an agent visit their home.

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PROPERTY

What to expect from your 2023 French property tax bills

The annual demands for property taxes have begun arriving at households across France - and many people will notice quite a difference to last year's bill.

What to expect from your 2023 French property tax bills

Every year in September and October the French tax office sends out bills to households across France relating to property taxes – these are separate to income tax bills, which arrive over the summer.

The autumn bills are usually made up of three parts; taxe foncière, taxe d’habitation and the redevance audiovisuelle.

However, system changes to all three parts mean that for some people bills will be be much lower than last year, while others will have nothing at all to pay.

Here’s what changes;

Redevance audiovisuelle – this was the TV licence and was charged at €138 per household, with some exceptions for pensioners or people who had no TV.

This year, it has been scrapped for everyone (including second-home owners) so most people’s bills are €138 less than last year.

Taxe d’habitation – this is the householder’s tax, paid by the inhabitant of the property – whether you rent it or own it. This is gradually being phased out, a process that started in 2019. It has been done based on income, with those on lower incomes having the charge scrapped first until it is gradually scrapped for everyone – with the exception of very high earners and second home owners.

So depending on your income level, you may have already had the tax phased out, or it may be phased out for you this year, or you may be paying a reduced rate this year.

These two changes are part of a tax giveaway from president Emmanuel Macron, and at the bottom of your tax bill you will find a note explaining how the charges have changed this year, and what you would have paid without the reductions.

It will look something like this;

Taxe foncière – this is the property owners’ tax and is paid on any property that you own – if you own the home you live in you may need to pay both taxe d’habitation and taxe foncière and if you are a second-home owner you will also pay both.

In contrast to the other two taxes, however, this one has been going up in many areas.

In fact, it’s connected to the taxe d’habitation cut – local authorities used to benefit from taxe d’habitation, so the phasing out has left many of them short of money. In some areas, they have reacted by raising taxe foncière.

This tax is calculated based partly on the size and value of the property you own (which is why if you do any major renovations or add a swimming pool you need to tell the tax office) and partly on the tax level decided by your local authority. 

This means that the actual rate varies quite widely between different parts of France, but in some areas it has gone up by 20 percent.

You can find more about how the tax is calculated, and how to challenge your bill if you think it is excessive, HERE.

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