Introduction: An Attractive but Regulated Market
France remains a popular destination for foreign real estate investment. However, non-residents – whether nationals of the European Union or third countries – must contend with a specific legal and tax framework. The judgment of the Court of Cassation of 15 March 2023 (No. 22-13.681) serves as a reminder of the importance of complying with reporting obligations and the rules of private international law.
1. Essential Legal Obligations for the Non-Resident
1.1. Capacity and Representation
The foreign purchaser must demonstrate their capacity to acquire (Article 3 of the Civil Code). For non-EU nationals, a prefectural authorisation may be necessary if the property is located in a regulated area (Decree No. 2019-1591). In practice, it is advisable to appoint an agent (lawyer or notary) for the execution of the deed of sale.
1.2. Financing and Exchange Control
Financing by means of a loan in foreign currency must comply with exchange control regulations (Articles L. 151-1 et seq. of the Monetary and Financial Code). Any transfer of funds exceeding €10,000 must be declared to customs.
1.3. Direct Taxation
The non-resident is subject to tax on rental income (Article 164 B of the General Tax Code) and, upon sale, to capital gains tax on immovable property (Article 244 bis A of the General Tax Code). International tax treaties may mitigate these taxes. Furthermore, property tax and the housing tax (for second homes) remain payable.
1.4. Reporting Obligations
Since the Finance Act for 2020, non-residents must declare their real estate property annually using Form No. 2042-IFI (wealth tax on immovable property) if the net taxable value exceeds €1.3 million. In addition, the tax authorities require a declaration of personal circumstances (Article 170 of the General Tax Code).
2. Analysis of the Court of Cassation Judgment of 15 March 2023
2.1. The Facts
A Swiss national, not a French tax resident, acquired an apartment in Paris in 2015. In 2020, he resold the property without declaring the capital gain. The tax authorities issued a tax adjustment notice, contested by the seller on the grounds that he was not required to declare in France due to the Franco-Swiss tax treaty.
2.2. The Decision
The Court of Cassation dismissed the appeal, confirming that the non-resident remains subject to the reporting obligation in France for the capital gain on immovable property, even if the tax treaty provides for an exemption from tax. The judgment recalls that the reporting obligation is distinct from the obligation to pay the tax (Article 170 of the General Tax Code). In this case, the seller should have filed a capital gains declaration (Form No. 2048-IMM) within one month of the sale, subject to penalties (40% surcharge).
2.3. Practical Scope
This decision underscores the strictness of the French tax authorities and the importance of complying with reporting formalities, even when the taxpayer considers themselves exempt from tax. It echoes previous case law (Council of State, 9 November 2015, No. 372557) which had already affirmed the autonomous nature of the reporting obligation.
3. Pitfalls to Avoid for the Non-Resident
- Failure to declare a capital gain: as in the commented judgment, omission exposes one to surcharges and late payment interest.
- Non-compliance with co-ownership rules: non-residents must appoint a representative in France for general meetings (Law of 10 July 1965).
- Lack of knowledge of planning rules: any construction project requires a building permit or a prior declaration, even for a non-resident.
- International succession: in the absence of a will, French law may apply (European Regulation No. 650/2012 for EU residents).
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4. How Maître Cécile Zakine Can Assist You
4.1. Advice in Private International Law
I assist you in choosing the acquisition structure (SCI, co-ownership, etc.) and drafting contractual clauses adapted to your personal situation (matrimonial regime, nationality, tax residence).
4.2. Tax Optimisation
I help you benefit from international tax treaties and structure your investment to minimise tax on rental income and capital gains. I support you with all tax declarations (IFI, capital gains, property tax).
4.3. Negotiation and Securing the Deed
I negotiate the conditions precedent
