Own a second home in France? Don't forget your tax return!
Last weekend, we attended the Second Home fair in Ghent. Buying a second home abroad is still a hot topic among Belgians, with France remaining an especially popular destination. Having a French property can pay off in two ways. During the holding period, you can earn rental income. When it comes to selling, you can make a significant return on your investment. Here, we give you an overview of the tax implications and mandatory formalities, both in France as well as in Belgium.
You choose NOT to rent out your French property
France
If you choose not to rent out your French property, you will not be liable for any income tax in France, and therefore not need to file a French tax return.
Belgium
Within four months of purchasing the property in France, the property must be declared to the Belgian authorities. Based on a questionnaire, the latter will attribute an estimated cadastral income to your property, which must, in turn, be declared through your personal income tax return. This is then exempted via the Belgian progression reserve mechanism. Be warned, as this will raise your average tax rate. As a result, your other income streams will be taxed more heavily.
You choose to rent out your French property
France
In France, they make a distinction between furnished and unfurnished rentals. Here, we assume that the property is rented out as furnished. In this case, rental income qualifies as corporate earnings. The rate of tax on corporate earnings can be determined in two ways:
- + Via a flat-rate cost deduction
- +Via an actual cost deduction
You will need to spontaneously register with the local French authorities and file a declaration.
Belgium
In Belgium, even if the property is rented out, any cadastral income must be declared when filing your personal income tax return, which is then exempted via the Belgian progression reserve mechanism.
Be aware that, should you decide to rent out your property using a digital platform, since 2022, the tax authorities are now aware of any income generated through such platforms.
You decide to sell your French property
If, at some point, you decide to sell your French property, this capital gain will be taxed exclusively in France, pursuant to the double taxation treaty between the latter and Belgium. Back in Belgium, any such capital gains will not need to be declared.
In France, the capital gains tax rate is 19%. On top of that, you also have the additional social charge, which is set at 7.5% if the seller already makes social security contributions in Belgium.
The capital gains value is equal to the difference between the sale and purchase price. Purchasing costs and remodelling works may be deducted to determine the actual amount of taxable capital gains. Lastly, abatements may also be applied, which increase according to the holding period of the property. After 30 years, the property can be sold tax-free.
Thinking of buying French property? Already own French property and looking to sell? Contact our specialists using the form below.
We base our advice on current legislation, interpretations and legal doctrine. This does not prevent the administration from being able to challenge it or to change existing interpretations.
