French apartment tax
- Thread starter cunninghams
- Start date
efm,
Indeed, the quote from revenue website that you posted seems to be very clear..... and so is the statement i got from the French revenue. I'll have to dig out this statement, but if memory serves me well, there was a mention about the dual treaty agreement between Ireland and France.
So basically, the owner envades tax by paying in one country only and does not evade tax by paying twice, once in each country.
Would you happen to know if that quote from Revenue website applies even if there is a dual treaty agreement between Ireland and the "foreign" country? Thanks
Indeed, the quote from revenue website that you posted seems to be very clear..... and so is the statement i got from the French revenue. I'll have to dig out this statement, but if memory serves me well, there was a mention about the dual treaty agreement between Ireland and France.
So basically, the owner envades tax by paying in one country only and does not evade tax by paying twice, once in each country.
Would you happen to know if that quote from Revenue website applies even if there is a dual treaty agreement between Ireland and the "foreign" country? Thanks
OK,
Did a little more digging and came up with a copy of the Double [broken link removed]between France and Ireland.
Key point in this treaty seems to be the following:
So I would interpret this to mean that you can offset any income tax paid in France against your tax liability in Ireland - however, you will be liable for any difference.
eg: You have an investment property in France yielding €8,000 per annum (after deducting all allowable expenses).
Your Irish tax liability assuming top rate is €8,000 * 42% = €3,360
If have already paid tax in France (€8,000 * 70% = 6000: €6,000 * 25% = €1,500) of €1,500 you can offset this against your Irish tax liabiity - so amount payable to Irish Revenue is €3,360 - €1,500 = €1,860
NB / CAVEAT - I am not a tax expert nor an accountant so I would seriously get a second opinion ! (There is probably a number of people on this board who know a lot more than I) - Also, another interesting point is that the DTA between France and Ireland was enacted before Capital Gains Tax was in Ireland - as a result it is not covered by the DTA and so when a capital gain arises in France there is France CGT and Irish CGT payable! (however, I believe a revised DTA is being negotiated so this might cease to be an issue in the near future)
Did a little more digging and came up with a copy of the Double [broken link removed]between France and Ireland.
Key point in this treaty seems to be the following:
So I would interpret this to mean that you can offset any income tax paid in France against your tax liability in Ireland - however, you will be liable for any difference.
eg: You have an investment property in France yielding €8,000 per annum (after deducting all allowable expenses).
Your Irish tax liability assuming top rate is €8,000 * 42% = €3,360
If have already paid tax in France (€8,000 * 70% = 6000: €6,000 * 25% = €1,500) of €1,500 you can offset this against your Irish tax liabiity - so amount payable to Irish Revenue is €3,360 - €1,500 = €1,860
NB / CAVEAT - I am not a tax expert nor an accountant so I would seriously get a second opinion ! (There is probably a number of people on this board who know a lot more than I) - Also, another interesting point is that the DTA between France and Ireland was enacted before Capital Gains Tax was in Ireland - as a result it is not covered by the DTA and so when a capital gain arises in France there is France CGT and Irish CGT payable! (however, I believe a revised DTA is being negotiated so this might cease to be an issue in the near future)
euroDilbert
Registered User
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My enquiries also led me to believe that you are liable to income tax in both Ireland and France.
The tax paid in France can be offset against the Irish tax liability.
The tax paid in France can be offset against the Irish tax liability.
There's a fundamental point being missed here. You are always liable to Irish tax* on foreign income. Double taxation agreements are there to ensure that you get a deduction on your Irish tax liability for tax paid in a foreign country.
* without going into details on residence rules
* without going into details on residence rules
DrMoriarty
Moderator
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Correct, if you are tax-resident in Ireland (and all the discussion so far suggests that).hmmm said:
Double taxation treaties essentially operate on a 'heads you lose, tails Revenue wins' basis, from the point of view of the average Irish taxpayer. If your tax cut abroad is lower than it would have been in Ireland, you owe Revenue the difference. If it's greater, then tough... — the income is taxable in the state in which it's earned.
cunninghams
Registered User
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can anybody give me the name of an accountant in Ireland who could help me with doing my accounts for my french apartment. I have very little french and all the paperwork is in french.
M
Meccano
Guest
Bacchus, you are misleading people VERY BADLY here!!
You are wrong about both the French system, and the Irish system!
Are you perchance selling French property to Irish people? Zut Alors!!
Here are the FACTS.
The French Tax system has 3 choices for owners who rent their property.
I. The Micro-Foncier (as you mentioned).
2. The Micro-Bic (I'll explain below)
3. The full-fat all expenses system (not sure what the French call it).
The Micro Foncier system you referred to only applies to UNFURNISHED PROPERTY. Any Irish owner is likely to be renting a HOLIDAY home, which is probably furnished. Therefore the MicroFoncier system DOES NOT APPLY!!
By the way - if you let your property unfurnished you are seriously asking for BIG trouble. French laws protect tennants interests over owners - and none more so than tennats renting unfurnished property! Don't do it!
The Micro Bic system is applicable to FURNISHED properties, and it is much more generous in its fixed allowances than Micro Foncier.
It works as follows (using Bacchus's example) Rental income 6,000 euro (the max is actually 76,300 per annum in the case of MicroBic!) subtract a fixed allowance of 72%, this gives a TAXABLE income of 28%, being 1,680 euro in this example.
That ammount is then taxed at 25%, so the tax payable is only 420 euro!!!
The other option - where you apply all allowances - interest etc - is very complex. You'll be lucky to get it right yourself if you don't speak technical French.
If you don't, then you need to hire an accountant, and you may find his fees will rise well over your tax liability under the simpler MicroBic regime. Be careful which system you choose to adopt - you are locked into it for 5 years.
I found most of the books I bought before buying my French property to be really rubbish at explaining these distictions - and its not helped by people (ahem!) making assertions when they don't know what they're talking about.
I had to learn the hard way.
This link explains the whole thing quite well: [broken link removed]
This years tax returns are due in May. The normal returns date has been delayed because they didn't print the forms in time, so you have a while yet.
You are wrong about both the French system, and the Irish system!
Are you perchance selling French property to Irish people? Zut Alors!!
Here are the FACTS.
The French Tax system has 3 choices for owners who rent their property.
I. The Micro-Foncier (as you mentioned).
2. The Micro-Bic (I'll explain below)
3. The full-fat all expenses system (not sure what the French call it).
The Micro Foncier system you referred to only applies to UNFURNISHED PROPERTY. Any Irish owner is likely to be renting a HOLIDAY home, which is probably furnished. Therefore the MicroFoncier system DOES NOT APPLY!!
By the way - if you let your property unfurnished you are seriously asking for BIG trouble. French laws protect tennants interests over owners - and none more so than tennats renting unfurnished property! Don't do it!
The Micro Bic system is applicable to FURNISHED properties, and it is much more generous in its fixed allowances than Micro Foncier.
It works as follows (using Bacchus's example) Rental income 6,000 euro (the max is actually 76,300 per annum in the case of MicroBic!) subtract a fixed allowance of 72%, this gives a TAXABLE income of 28%, being 1,680 euro in this example.
That ammount is then taxed at 25%, so the tax payable is only 420 euro!!!
The other option - where you apply all allowances - interest etc - is very complex. You'll be lucky to get it right yourself if you don't speak technical French.
If you don't, then you need to hire an accountant, and you may find his fees will rise well over your tax liability under the simpler MicroBic regime. Be careful which system you choose to adopt - you are locked into it for 5 years.
I found most of the books I bought before buying my French property to be really rubbish at explaining these distictions - and its not helped by people (ahem!) making assertions when they don't know what they're talking about.
I had to learn the hard way.
This link explains the whole thing quite well: [broken link removed]
This years tax returns are due in May. The normal returns date has been delayed because they didn't print the forms in time, so you have a while yet.
You are very presumptuous to invalidate the content of a complete post (#13 i guess) because of an incomplete statement rather than an incorrect one (for French system). I still persist in maintaining that the information post in #13 about French tax Option 1,2 & A, B is correct.meccano said:
Any open minded person will appreciate that it is not realistic to cover every single aspect of a tax system in few lines.
While i do accept i was wrong about irish tax liability early in the thread, i think the matter was clarified mainly in post #22 and #23 when we brought in the DTA and that emf dug about the specifics of Article 21-4-B.
In fairness to other contributors, they also had stated tax liability in Ireland but did not back up the info as EFM did.
Unfortunately, nop... but i wish i did as you would be retired by now with more money in the bank than i could expect to spend in a life timemeccano said:
I have never seen any mention to "furnished/unfurnished" when reading about micro-foncier. But i am willing to accept you complement of information shall you be ale to back it up by please posting a link or extract of document mentionning "unfurnished only" for the application of micro foncier.meccano said:
Meccano, you are misleading people VERY BADLY here!!
If you want be bring in additional specifics about the criteria to qualify to micro-foncier, please do correctly and accurately by stating that there are at least 7 factors to consider.. one of which being of direct relevance to Irish investors as it concerns "new build qualifying for Perisson, Besson or Robien investment law" (leaseback) which are excluded from micro foncier rules.
Thanks for that, i did know about it.meccano said:
But does it really matter about much tax you actually pay in France as you will ultimately end up paying 42% ( a bit in France, a bit in Ireland). anyway by the end (presuming 42% tax rate applicable).meccano said:
At this point in the thread, EFM has hit the nail on the head by publishing the text from revenue, and from this post on, Irish tax liability is unambiquously accepted., even by me now since EFM post!!!
Happy now?
I know for a a fact 3 years ago Irleand did not have a tax agreement where you avoid Iriah tax liability with France so double taxation on rental income from France was the only way.efm said:
The revenue commision here also released a warning about 6 months ago that people better decalre their interest in foriegn property as they were on there way to investigate it. I would say we could see a similar tax fight on this issue as in non resident accounts in about 10-15 years.
M
Meccano
Guest
Its quite simple.
You pay your French Tax using the MicroBic system (assuming you have a FURNISHED property). The effective tax rate is only about 7% !!
You then report the rental income to the Irish Revenue.
But instead of a simple system (like MicroBic) you must file claims for all reliefs you are entitled to - Mortgage Interest being the largest one, but other expenses can also be set off against the income.
Whatever you have left exposed after these deductions will be charged at 42% (assuming thats your rate).
You then deduct the tax already paid in France from that ammount.
Whats left outstanding after all that - is your Irish tax bill.
Its not so difficult.
If you have a large loan you'll possibly not have any tax to pay in Ireland either.
You pay your French Tax using the MicroBic system (assuming you have a FURNISHED property). The effective tax rate is only about 7% !!
You then report the rental income to the Irish Revenue.
But instead of a simple system (like MicroBic) you must file claims for all reliefs you are entitled to - Mortgage Interest being the largest one, but other expenses can also be set off against the income.
Whatever you have left exposed after these deductions will be charged at 42% (assuming thats your rate).
You then deduct the tax already paid in France from that ammount.
Whats left outstanding after all that - is your Irish tax bill.
Its not so difficult.
If you have a large loan you'll possibly not have any tax to pay in Ireland either.
From reading the above posts, there is some confusion over how to go about calculating tax on French property. I am currently looking at leasebacks in France, and the below information has been sent to me by the estate agent in France that I have been dealing with. This obviously refers to ones French tax liability only, and one must in turn then report their foreign rental income to the Irish Revenue, where they will be liable to Irish income tax, and any tax paid in France can be used as a credit under the double taxation treaty.
The below seems to agree to the Micro Bic system already mention even though if is referred to as the Regime Reel Simplifie here.
“All your property-related expenses including the accountant’s fees, property tax, acquisition costs (known as notary fees), and annual percentage for property devaluation and interest paid on the mortgage are deductible from your rental.
There are two taxes for property owners in France, the "taxe d'habitation" (property tax for the municipality) and the "taxe foncière" (land owner's tax). The first is paid by the management because you will not be living in your property (this tax is paid by the tenant), the second, which is to be paid by you usually amounts to about one month’s rental income and is ultimately included in your deductible expenses (see above). You are exempt of the taxe foncière for the first two years (law on new-builds in France.
Investors whose income from leaseback properties in France does not exceed 23 000 euros per annum will be encouraged by their accountant to opt for the "regime réel simplifié"
« Opting for the régime réel simplifié” will enable you to deduct all the expenses incurred (devaluation and mortgage interest included) in addition to the fixed rebate of 72%”
So if your income is 5000 euros. You will first deduct the fixed 72% you are left with 1400
euros from which you deduct all your expenses, and so virtually no income tax will be due.”
In relation to Irish tax liability, my understanding is as follows, however perhaps some one might be able to clarify for me if the below approach is correct
Take your gross French rental income
Deduct relevant expenses (to include notary fee, tax foncier, French accountant charge, Mortgage Interest on French mortgage)
Calculate tax on profit at a rate of 20% / 42% depending on which tax rate you are on
Deduct any tax paid in France (under the Double Taxation Treaty)
This gives your Irish tax liability
The below seems to agree to the Micro Bic system already mention even though if is referred to as the Regime Reel Simplifie here.
“All your property-related expenses including the accountant’s fees, property tax, acquisition costs (known as notary fees), and annual percentage for property devaluation and interest paid on the mortgage are deductible from your rental.
There are two taxes for property owners in France, the "taxe d'habitation" (property tax for the municipality) and the "taxe foncière" (land owner's tax). The first is paid by the management because you will not be living in your property (this tax is paid by the tenant), the second, which is to be paid by you usually amounts to about one month’s rental income and is ultimately included in your deductible expenses (see above). You are exempt of the taxe foncière for the first two years (law on new-builds in France.
Investors whose income from leaseback properties in France does not exceed 23 000 euros per annum will be encouraged by their accountant to opt for the "regime réel simplifié"
« Opting for the régime réel simplifié” will enable you to deduct all the expenses incurred (devaluation and mortgage interest included) in addition to the fixed rebate of 72%”
So if your income is 5000 euros. You will first deduct the fixed 72% you are left with 1400
euros from which you deduct all your expenses, and so virtually no income tax will be due.”
In relation to Irish tax liability, my understanding is as follows, however perhaps some one might be able to clarify for me if the below approach is correct
Take your gross French rental income
Deduct relevant expenses (to include notary fee, tax foncier, French accountant charge, Mortgage Interest on French mortgage)
Calculate tax on profit at a rate of 20% / 42% depending on which tax rate you are on
Deduct any tax paid in France (under the Double Taxation Treaty)
This gives your Irish tax liability
M
Meccano
Guest
Paul, that description of the French Tax system refers to the regime réel simplifié which only applies if the income is in excess of 76,300 euro.
With the MicroBic system (rental income below 76,300) you are NOT allowed claim those other expenses in addition to the 72% deduction.
If you want to claim such deductions you must use the full claims system (regime reel) and fill in a complex full tax return. In that regime you are not entitled to the 72% flat rate deduction.
With the MicroBic system (rental income below 76,300) you are NOT allowed claim those other expenses in addition to the 72% deduction.
If you want to claim such deductions you must use the full claims system (regime reel) and fill in a complex full tax return. In that regime you are not entitled to the 72% flat rate deduction.
cunninghams
Registered User
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- 104
So, can anybody recommend an irish accountant to oversee my 2005 french rental income ?
Meccano,
Thanks for your clarification. It just goes to show that you need to be very careful when receiving information from agents selling overseas properties, and you should always do your own research / due dilligence.
Cunningham,
When purchasing a leaseback property, most French developers recommend that you take on a particular accountancy firm who will assist you with your VAT rebate, and then prepare your french tax return on an annual basis.
In the case of the scheme I am looking at, PWC in France are the recommended accountancy firm. They are quoting €350 a year plus vat to prepare an annual french tax return, and make the relevent payments.
I'm not sure would they quote the same price to an individual looking for a tax return to be done up for a non-leaseback, but you could always approach some of the Dublin offices of the big 4, and perhaps they might be able to provide you with the contact details of an english speaking tax expert in their French office. From my experience of dealing with the big 4 through my work, they do tend to have good English speakers in their overseas offices.
They would obviously only deal with your French tax liability which still leaves your Irish tax liability, but I'm sure if you contact the Irish Revenue and ask them how to treat the overseas rental income in your Irish tax return, they would offer some assistance there.
Thanks for your clarification. It just goes to show that you need to be very careful when receiving information from agents selling overseas properties, and you should always do your own research / due dilligence.
Cunningham,
When purchasing a leaseback property, most French developers recommend that you take on a particular accountancy firm who will assist you with your VAT rebate, and then prepare your french tax return on an annual basis.
In the case of the scheme I am looking at, PWC in France are the recommended accountancy firm. They are quoting €350 a year plus vat to prepare an annual french tax return, and make the relevent payments.
I'm not sure would they quote the same price to an individual looking for a tax return to be done up for a non-leaseback, but you could always approach some of the Dublin offices of the big 4, and perhaps they might be able to provide you with the contact details of an english speaking tax expert in their French office. From my experience of dealing with the big 4 through my work, they do tend to have good English speakers in their overseas offices.
They would obviously only deal with your French tax liability which still leaves your Irish tax liability, but I'm sure if you contact the Irish Revenue and ask them how to treat the overseas rental income in your Irish tax return, they would offer some assistance there.
M
Meccano
Guest
PaulJ, this crowd: advertise a returns service for 289 euro.
I've never used them, so I can't vouch for them - but they seem cheap!
I've never used them, so I can't vouch for them - but they seem cheap!
C
cross4
Guest
Meccano,
You say that it asking for trouble to let an apartment unfurnished. Can you explain further about tennants rights etc.
Also for the Irish tax liabilty will the revenue allow for the interest on a french mortagage if this has already been allowed in france.
You say that it asking for trouble to let an apartment unfurnished. Can you explain further about tennants rights etc.
Also for the Irish tax liabilty will the revenue allow for the interest on a french mortagage if this has already been allowed in france.
M
Meccano
Guest
Cross4; in France there are very heavy rules about how you can treat a tennant.
For instance - between the months of October and May you cannot evict a tennant even if they are seriously in default of rent. Basically you are stuck with them.
An unfurnished property is especially risky because you are required to sign a lease of a minimum of 1 year, and at the end of that year the tennant has the overriding right to choose to extend it for another year.
If you want to evict them you can only do so on the grounds that you are:
a) Going to sell the property
or
b) Going to move into it yourself.
If you are going to sell it, you must give the tennant first refusal on the sale!!
If you say you are going to move into it (to shift them) and then don't move in - and they can show you've not moved in - then they can sue you for the rental income you've made from a new lessor/ and - or - demand to be re admitted to the property.
The rental period on an unfurnished property can be no less than 12 months under law. The rental period on a furnished propert used to be a minimum of 6 months, but they've just upped it to 8 months, with a 12 month extension clause.
I really can't figure why anyone would go into the long-term French rental market. Short holiday lets is the only way to go.
If you let long term to a French native - you are mad.
For instance - between the months of October and May you cannot evict a tennant even if they are seriously in default of rent. Basically you are stuck with them.
An unfurnished property is especially risky because you are required to sign a lease of a minimum of 1 year, and at the end of that year the tennant has the overriding right to choose to extend it for another year.
If you want to evict them you can only do so on the grounds that you are:
a) Going to sell the property
or
b) Going to move into it yourself.
If you are going to sell it, you must give the tennant first refusal on the sale!!
If you say you are going to move into it (to shift them) and then don't move in - and they can show you've not moved in - then they can sue you for the rental income you've made from a new lessor/ and - or - demand to be re admitted to the property.
The rental period on an unfurnished property can be no less than 12 months under law. The rental period on a furnished propert used to be a minimum of 6 months, but they've just upped it to 8 months, with a 12 month extension clause.
I really can't figure why anyone would go into the long-term French rental market. Short holiday lets is the only way to go.
If you let long term to a French native - you are mad.