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TAXES

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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SECOND HOMES

New French property tax declaration – your questions answered

This year the French tax office has announced that property-owners have to complete an extra tax declaration - from the rules for non-residents to second-home owners, we answer your questions on this.

New French property tax declaration - your questions answered

In 2023 there is an additional requirement for anyone who owns a home in France – they must fill in a one-off Déclaration d’occupation, stating whether their property is their main residence or a second home.

The reason for this is changes to the tax system that are gradually phasing out taxe d’habitation for all but the highest earners – with the exception of second homes.

You can find a full explanation of how to file the declaration HERE.

Many of our readers have contacted us with questions about this new requirement, so we’ve answered some of the most frequently-asked here;

Do I still have to do this even though I don’t live in France?

A fairly sizeable number of people own property in France (usually holiday homes) but live elsewhere, such as the UK or the US. If you don’t live in France or have income in France you probably won’t have to do the annual income tax declaration, but the Déclaration d’occupation is different.

It concerns anyone who owns property in France, including second-home owners who live in another country.

Do I have to do this even though I pay all my taxes in another country?

If you own property in France you probably do, in fact, pay tax here – property taxes. Bills go out every autumn for the taxe foncière (the property owners’ tax) and taxe d’habitation (the householders tax) – and second-home owners would usually pay both. You may also receive a bill from your commune for waste-collection services, although the annual TV licence bill (which used to be sent out at the same time as the property tax bill) has been scrapped this year.

If you own property in France and have never paid property taxes, it might be worth a trip to the local tax office to check that you are registered correctly, as almost all property owners are liable for property taxes.

Do I have to do this every year now?

No, this is a one off. You complete the declaration this year (before June 30th) and then you don’t have to do it again until your situation changes – eg a second home becomes your main residence.

Why do we have to do this?

It’s because of changes to the tax rules. Taxe d’habitation – the occupier’s tax – used to be paid by virtually everyone, but is now gradually being phased out for all but high earners. The exception to this is second homes, so the tax office needs to know whether your property is used as your main residence or a second home so that they know whether to send you a bill in autumn.

Does this mean more taxes?

No, the declaration is purely for information – if your property is a second home you will continue to get your annual taxe d’habitation bill as normal, if it is a main residence you may receive no bill or a reduced bill, depending on your income.

What about commercial property?

If you own commercial property such as a workshop, bar or retail premises, then this does not affect you, the tax declaration is in relation to homes.

It’s all about clearing up the property status for taxe d’habitation, and you don’t pay this type of tax if it is a commercial premises.

What about gîtes, holiday homes or Airbnb properties?

It’s really all down to what you use the property for – if you run it entirely as a business it should be registered as a business and is therefore not concerned by this.

If the property is your home and you occasionally rent it out on Airbnb (say, when you’re on holiday) then it still counts as a home and you will need to complete the déclaration d’occupation. Be aware that certain areas, including Paris, limit how many days per year you can rent out a property on Airbnb without registering it as a business.

Some people keep properties mostly for their own use as second homes but sometimes rent them out for extra money – be aware that if you do this, you may need to register as a business and declare any income received – full details here.

Can I just ignore it, or tell them my second home is a main residence?

Ignoring or lying to the tax office is generally quite a bad idea whatever country you’re in – they can get quite cross.

This sounds like a massive pain

Welcome to France – home of bureaucracy! Paperwork is a fact of life in France and that’s probably unlikely to change soon. If you’re already registered in the impots.gouv site then this is one of the more painless admin tasks – a couple of clicks, fill out the form and file it online and you’re done.  

If you have questions on the property tax declaration, you can email us on [email protected] and we will do our best to answer them

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