Transfer taxes can be either free of charge or for consideration. These taxes, often referred to by the public as “notary fees,” represent a significant portion of the additional costs during a real estate transaction. They vary from region to region and can significantly impact the price of real estate sales or acquisitions.
Transfer Taxes: What Are They?
Transfer taxes are fees that any real estate buyer must pay (Article 1593 of the French Civil Code). They encompass various components: registration fees or land registration tax, real estate security contributions, and notary fees.
There are two types of transfer taxes:
Transfer Taxes for Consideration
Transfer taxes for consideration (DMTO) are taxes collected during the transfer of property ownership. They represent a significant portion of additional costs during a real estate acquisition and vary depending on the property’s location.
Several legal operations, such as a capital contribution to a company, an auction, or a sale, trigger the obligation to pay transfer taxes for consideration.
Transfer Taxes Free of Charge
Transfer taxes free of charge relate to property transfers occurring during a gift or inheritance (intestate or testamentary transfers). They do not involve any financial consideration by the recipient.
In the context of inheritances, transfer taxes free of charge are calculated on the net share received by each heir. The tax rates also vary based on the degree of kinship.
Good to know: The filing of the declaration and the payment of inheritance tax must be done within 6 months after the date of death.
How Are Transfer Taxes Calculated?
The amount of transfer taxes is primarily based on the value of the real estate being acquired. They are calculated on the purchase price or the fair market value of the property. Note that a real estate appraisal is essential to determine the value of any real estate asset.
Generally, DMTO consists of three main components: the departmental portion, the municipal portion, and the portion that goes to the state.
- The departmental portion: This ranges from 3.80% to 4.50% depending on the department. The departmental council sets this rate within the legally allowed maximum.
- The municipal portion: This is intended for municipalities and is set at 1.20%.
- The state’s portion: Also known as the land registration tax, this is calculated based on the amount collected by the department. Generally, this tax represents 2.37% of the amount of the departmental rights.
Additional notary fees and other incidental costs are added to this. Unlike the taxes for consideration, transfer taxes free of charge consider the degree of kinship between the donor and the recipient, as well as the value of the transferred property.
Good to know: Since April 1, 2013, for safety and traceability reasons, all payments over €10,000 related to real estate transactions must be made by bank transfer. This includes transfer taxes!
The transfer tax rates are published every year on June 1st; the rates for the current period run from June 1, 2023, to May 31, 2024. These rates are proportional to the declared price of the acquired property. Thus, the higher the real estate advertisement’s value, the higher the total amount for the transfer taxes. Looking for a property in Paris? Find our Paris real estate listings and take advantage of the best deals!
How to Reduce Transfer Taxes?
The law provides several exemptions from registration fees and the land registration tax. This is the case for:
- Sales of houses or apartments made by public housing agencies or mixed-economy companies;
- Rehabilitation lease contracts.
- Reduced rates for transfer taxes apply to:
- Sales of new buildings subject to VAT;
- The purchase of a home with a commitment to resell it within five years.
Twenty-one departments offer exemptions for rehabilitation leases from DMTO (until May 31, 2024). This includes:
- Aisne
- Calvados
- Charente-Maritime
- Doubs
- Haute-Garonne
- Landes
- Haute-Loire
- Loire-Atlantique
- Lot
- Lot-et-Garonne
- Oise
- Pas-de-Calais
- Hautes-Pyrénées
- Bas-Rhin – European Collectivity of Alsace
- Haut-Rhin – European Collectivity of Alsace
- Saône-et-Loire
- Sarthe
- Var
- Yonne
- Essonne
- Hauts-de-Seine
Transfer taxes are mandatory and must be paid to the state. However, some developers may cover notary fees. If the sale price includes furniture, it is also possible to reduce the amount of transfer taxes.