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PROPERTY

Why French homeowners face higher property taxes in 2023

As the 2022 deadline to pay property taxes in France approaches, homeowners will likely have to face higher property taxes in 2023.

If you are a homeowner in France, you may want to consider putting some money aside as property taxes could increase significantly next year. 

The taxe foncière – a property ownership tax levied at local level – is a tax paid by all property owners in France. It is separate to the taxe d’habitation, which is paid by whoever occupies the property (whether they are an owner or a tenant) and applies to anyone who owns a building or land. The latter is being progressively phased out.

Why the possible increases?

A large reason property ownership taxes may increase in 2023 is due to the fact that property values are reevaluated each year in November according to inflation and other factors that have changed the value of the property such as home extensions or new swimming pools. 

In general, the rate of taxe foncière has increased in France in recent years is due to gradual scrapping of another property tax, taxe d’habitation that left local authorities short of cash.

Why did my bill go up for 2022 and what’s the deal for 2023?

For 2022, property tax payments are due on October 15th or 20th, depending on payment method. Many French homeowners were already met with an unpleasant surprise when they received their tax notices this year.

The revaluation to reflect inflation allowed for a 3.4 percent increase in 2022, which increased the property tax on all homeowners. Additionally, municipalities voted to increase local taxes. In Marseille, rates went up by 13.1 percent, for Tours it was 11.6 percent and Pau saw a rise of 10 percent. 

In 2023, these values could be even higher.

Theoretically, property values across France ought to be reevaluated to reflect skyrocketing inflation, which would lead to an increase of 7 percent (in comparison to the 3.4 percent rise that was seen in 2022). In June, the French Finance Minister Bruno Le Maire assured property-owners that this issue had been identified and that the government was considering capping the rate.

However, according to reporting by French daily Le Parisien, several senior officials have indicated that “no capped rate for the taxe foncière will be included in the finance bill to be presented in late September.”

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

In effect, this means that the 2023 budget would allocate for an increase of property taxes by approximately 6.5 to 7 percent – a rise that would impact at least 30 million homeowners in France.

Various suggestions have been put forward aimed at keeping the taxe foncière bills down, such as capping increases to 3.5 percent or linking the the level of government assistance to local authorities to inflation (meaning local authorities would be less inclined to raise taxes).

Nevertheless, as of September 23rd, these solutions had not yet been put into place.

Second home owners to be harder hit

Second-home owners in France have to worry about the taxe d’habitation (residence tax) on top of the taxe foncière.

Even though the former is in the process of being phased out for most French residents – apart from the highest earners, those with second homes are still required to pay it.

And for many of those that do, the rates are going up.

In 2022, more towns have voted to increase it, while others gained the ability to add a surcharge for second-home owners, with French daily Le Parisien reporting that the taxe d’habitation “continues to soar.” 

Municipalities in zones tendues (areas with a housing shortage) have the ability to choose to increase taxe d’habitation by up to 60 percent for second home owners.

READ MORE: Tax hikes of up to 60% for French second home owners

From 2023, several new areas – including Nantes – will join the list of zones tendues, meaning they will be able to vote to increase taxes for second-home owners.

In 2022, large cities such as Bordeaux, Lyon, Biarritz, Arles and Saint-Jean-de-Luz saw their city councils vote to increase the tax at the maximum 60 percent.

How is taxe foncière calculated generally?

The formula is complicated, and it is calculated each year for you by your local authority (though under the auspices of a formula set by the French finance ministry). Basically, it has to do with the rentable value of your property divided by two and then multiplied by the tax level set by your local authority.

READ ALSO: Taxe foncière: What is the French property tax and do I have to pay it?

The local authority’s tax rate varies hugely from place to place, which is why two people with similar sized homes in different areas can end up with wildly different bills.

In fact to make it more complicated it’s actually three local authorities – the commune, the département and the région – which all set their own tax rates then divide up your tax to pay for local services.

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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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