a:Non-Resident French Property Investing

By Alex Strzetelski
One of the founding members of the European Union, France is organized as a Unitary Semi-Presidential Republic. In 2002, France was the second largest recipient of direct foreign investment just behind Luxemburg (Luxemburg is the leading direct investment recipient do to its investment banking money transfers.) With a large corporate base France has a wide variety of private corporations operating within its boarders. These companies, however, operate with quite a bit of government intervention owing to the somewhat economically dubious (interfering) tendencies found through the country.

Government Policy

In a certain way, these governmental interactions in the corporate world have led to certain challenges that have slowed the potential of the economy. Currently, the leading issue facing the French economy is the low level of employed workers during their primary working age period. In France only 68.8 percent of the working aged population aged 15-64 years was working when compared to 80 percent of the Japanese.

Generally, this issue is attributed to decades of very high unemployment and policies by the government that let the younger population put off working for as long as possible while taking an early retirement in their early 50s’. Overall, this does not leave much disposable income for mortgages and other personal wealth building opportunities.

The government has recently been working to limit policies geared toward the current reality but only with limited success. Policies to extend the weekly hours worked in France were met with riots and a status quo situation. Currently, it is only imaginable of where the French economy could go if policies were to be enacted to stem these practices as the French have the leading per/capita productivity level in the world just ahead of the United States.

Non-resident property investment

The thought of owning a flat in Paris, or other large French city, is one that most people can only dream about. In some cases, it may best be left in a dream. The options and hoops that are presented in French cities can be mind boggling. In any situation that may present itself the non-resident investor would be well advised to have a qualified advisor by their side. The wrong choice can land the non-resident investor in a poor financial situation that may be difficult to be extracted from.

French property investing

To say that the French do things a little bit differently in all they do is an understatement when it comes to being a non-resident investor in their country. Having a tax attorneys’ advice is a very large requirement if you are going to make the most efficient use of the rents that you have earned on your French investment.
There are basically two types of non-resident investments in France for renting or leasing an investment property (there are subtle differences in using the word “leasing” in these instances so when understanding the tax code be sure to understand the subtle distinctions.) These two options are furnished or unfurnished. There are advantages and disadvantages to each although they both fall into several categories when deciding how you may choose to operate your investment. These options include:

• Lease back
• Let furnished short term
• Let unfurnished long term
• Owned through Civil Society

With a lease back you are essentially buying the property and then giving it over to a management company to then run it. There will be a value added tax of 19.6 percent with this method of running the property. The investor, however, can make several tax maneuvers available to the non-resident investor and reduce the value added tax to 5.5 percent.

The short term let furnished option is somewhat easier to understand although the term easier is used loosely. In this instance you have two options involving itemizing expenses or not. In either case the rental income threshold is E76, 300.
The long term unfurnished option works in much the same way as the short term option although in this instance the income threshold is E15,000 and the exemptions are slightly different in the second option where rental income and expenses must be itemized.

The society option is to join a group of owners in a society that is run much like a corporation. This method of owning property, as a non-resident, takes quite a bit of the headache out of following the individual aspects of the French tax code. The down side is that you are responsible to the corporation’s direction and as such lose some autonomy.

To invest or not to invest

Generally, the climate for non-resident investors is fairly good. With the arrival of a new government the investment opportunities may actually become even better. The real issue is that of paperwork and government medaling. There are so many options, reporting and requirements that an investor will often wonder if the investment was worth the effort in the first place. For the most part, it is. Most of the real hassles are found in the cities. If a more rural investment is an option this may be a consideration.

The last substantial consideration is that of social change in France. A new government that has indicated westward leanings has begun to make some “noise.” The French people are not that fond of radical change and may, or may not, respond in ways advantageous to non-resident investors. Time will tell.

Non-resident investment mortgage options

With fewer people working one would think that there would be less general opportunity for mortgage loan qualification regardless of status (non-resident or otherwise.) This is not the case as loan products are advantageous to the borrower. The consideration of what type of loan is applied for is a very important one. Be sure you understand the words, and how they are being used. Definitions may not mean what you may think they may mean. Loans available currently include:

• For purchase
• Re-mortgage
• Self build
• Renovation
• Equity release
• Variable
• Fixed
• Interest only
• Non-status loans are not available


The loan to value rate is also very sympathetic with a rate of 85% and can include fees. For an interest only loan, a loan to value rate of 80 percent can be had. Euro and Sterling currencies are available with a maximum term of 25 years and a maximum age at completion of 75. Interest rates are also remarkable and start at 3.65 percent.

For an economy of Frances’ sophistication the minimum documentation is fairly straight forward and includes:

• Last six months of bank statements
• P60 or equivalent
• Letter from accountant indicating tax paid if self employed
• Three years of audited accounts if self employed
• Certified true copies of passports
• Two forms of address identification
• Completed application form
• French bank account details
• Property documentation


Less than Efficient But It Works

The governments’ heavy hand in the economy of France has had its positives and negatives, depending upon the point of view you would like to take. From an employees’ stand point you are working less and enjoying life more, unless you really enjoy your work or work for a multi-national company. From the economists point of view the heavy hand of government and its past economic leanings make the economy less than efficient and skew overall results. France talks a good game but there are underline issues that need to be addressed if growth of true significance is to be a long term reality.

As the new westward leaning government begins to make its presence known there will likely be contentious battles fought as those in power seek to retain what they have built. Where the future lies is still a mystery although non-resident investment can only get easier from where it is now.


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