Purchase of a property in France by a foreign company : How to proceed?

Establish an action plan and budget :

Purchasing a property is a significant investment, and it is crucial to approach the process with a clear plan of action and a realistic budget. This is especially true for foreign companies looking to buy a property in France. A well-thought-out plan and budget can help reduce the risk of unnecessary or costly investments and ensure that all steps in the property purchase process are followed.

To begin, it is essential to assess the company’s financial situation and determine how much can be allocated towards the purchase. This will help establish the budget and guide decisions throughout the process. It is also important to consider any additional expenses that may be incurred, such as legal fees, taxes, and maintenance costs.

Another aspect to consider is the type of property being purchased. There are different regulations and legal requirements depending on whether the property is residential or commercial, newly built or pre-existing, and its location in France. It is important to research and understand these regulations to avoid any potential issues in the future.

Taking into account tax considerations:

Purchasing a property in France can result in tax obligations for a foreign company. Therefore, it is important to take into account these considerations before making the purchase.

Taxation of rental income and capital gains:

Once rental income from a French property is generated, it will be subject to corporate tax according to the rules of industrial and commercial profits (BIC). However, the sale of a property is subject to different tax rules for foreign companies. Most foreign companies are subject to taxation similar to that of French companies when selling a property in France. This can make the transaction prohibitively expensive, as the capital gain is calculated based on the net book value, which is equal to the purchase price of the property minus previously recorded amortization. The calculated capital gain is then subject to corporate tax. Unlike the rules for individuals, there is no reduction for the duration of ownership.

Taxation of real estate assets: the 3% tax

Companies and organizations owning real estate in France may be subject to a 3% tax based on the fair market value of their company. However, there are several possible exemptions, including for companies that submit a statement in France each year indicating the distribution of their share capital.

Understanding the legal aspects :

When a foreign company decides to purchase a property in France, there are several important legal considerations that must be taken into account. Failure to understand these legal aspects can result in complications and legal issues down the line.

Drafting the sales contract

One of the most important legal aspects to consider when purchasing property in France is the drafting of a purchase contract. The contract must be in compliance with French law and clearly outline the terms and conditions of the sale. It is recommended that a qualified French real estate attorney be engaged to draft the contract to ensure its legality and accuracy.

The due diligence

Due diligence is another critical aspect of purchasing property in France. This involves conducting a thorough investigation of the property to ensure that there are no legal issues or complications that could affect the purchase. Due diligence may include researching property ownership, zoning and land use regulations, environmental considerations, and other relevant factors.

Overall, purchasing property in France as a foreign company can be a complex process, but with the right legal and professional guidance, it can also be a successful and profitable investment.