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Place Des Vosges

The French government has finally decided to launch the review of the antic  “rental value” , the basis for calculating the taxe foncière and taxe d’habitation ( French property taxes).

Please read our previous post on taxe foncière and taxe d’habitation for further explanation:

“French taxe d’habitation: calculation and explanations on tax statement”

“Taxe fonciere: calculation, payment, deadline and claim”

The “rental value” was set up in the 1970ies and is often disconnected to the “market” rental value. Although the “rental value” is uniformly increased throughout the country every year, (e.g. for 2015: +0.9%), the original basis was set up at a time when houses in the city center were in a pretty poor state, while the brand new flats in the suburb were considered an epitome of comfort. In the early 1970ies, the -nowadays very posh & up market- XVIIIth century houses in Paris “Marais” were not sought after and generally lacked basic comfort. Therefore, the “rental value” used for the calculation of French property taxes is likely to be significantly lower in “Le Marais” than in a less affluent suburb of Paris. It would be the opposite for the market rental value, that you would get when renting out a flat in “Le Marais” compared to the suburb.

After several unsuccessful attempts (in 1990 and 2007), the French government has decided to review the “rental value” all over the country once and for all. The process has been initiated earlier this year for 5 “départements”, Paris, Charente-Maritime (La Rochelle), Nord (Lille), Orne (Alençon), and Val de Marne (South of Paris). In these “départements”, the “rental value” review should be ready for the 1st of January 2016, and will thus be applied for the “taxe fonciere” and “taxe d’habitation” due for payment in the fourth quarter of 2016.

Old properties in posh city center are likely to experience an increase in property taxes, however recently purposed built houses and flat should not experience any increase in property taxes. There is a general feeling in France that the review of “rental value” will lead to a general increase of property taxes. This might not be the case, despite the outcome of the reform remains uncertain. Some properties may clearly experience a significant increase, while other landlords in the French countryside might see a tax decrease. The “rental value” review should be closely investigated by a French Parliament committee, a report is due for September. Additionally, this is a highly sensitive subject and it will take several years to review all “rental value”. The government plan is to complete the review by 2018. A few elections will take place in between, which could have an impact on the final outcome.