Paris taxe foncière rates to rise by 50% next year

Taxe foncière rates are set to rise by 50% in Paris in 2023, the city’s mayor, Anne Hidalgo, has announced.

Taxe foncière (ownership tax) bills are recalculated each year based on the amount that the property could in theory be rented out for – this is its valeur locative cadastrale (VLC) and an annual increase is applied to VLCs, based on the consumer price index.

To obtain the tax bill, the VLC is halved, to take account of expenses such as maintenance, insurance and repairs, and then this has a percentage rate applied to it which can be adjusted up or down on the decision of the mairie and/or intercommunal bodies.

It is this commune percentage rate which is set to increase from 13.5% to 20.5% next year.

The VLCs of all French properties are expected to rise automatically by up to 7% in 2023, as inflation exceeded 6% over a year in October. VLCs already increased by 3.4% in 2022, based on a November 2021 inflation rate of 3.4%.

Paris’ increased taxe foncière rates are set to add several hundred million euros to the municipality’s revenues.

Despite the sharp 2023 increase, Paris will still apply a relatively low taxe foncière rate compared to other major cities.

For example, Lyon, Nice and Nancy’s rates are already at around 29%, Strasbourg charges at 37%, Marseille at nearly 40%, Reims, Rennes and Bordeaux at 44-46% and Lille at 50%.

Read more: Where has taxe foncière increased the most in France in 2022?

In Dijon, Grenoble, Montpellier and Le Havre, this threshold has been exceeded.

However. Virginie Pradel, who is a tax lawyer and president of a fiscal research institute, has argued in a Figaro article that property owners in Paris are also more likely to be subject to rental restrictions relating to properties with low energy ratings, because buildings are often older, with worse insulation in the capital.

Over the next few years, properties with the lowest energy ratings will gradually be banned from the long-term rental market, which means that their owners will have to carry out eco-renovations in order to continue renting them out.

It is thought that the city of Paris is increasing its taxe foncière rates to help cover its more than €7.7billion debts, and as a response to the gradual phasing out of taxe d’habitation for main homes, which will reduce revenues from local taxes.

Read also: Taxe d’habitation deadline approaches in France: Who still pays this?

A report published in September 2022 by Paris’ deputy mayors in charge of finance and budget, has suggested that the city could increase the tax applied to empty properties, multiplying it by at least four, to help increase revenues.

It will not be able to increase the surtaxe d’habitation which can be applied to second homes in zones tendues (urban areas of more than 50,000 people experiencing a housing shortage) as, in Paris,, this surcharge is already at its maximum rate of 60%.

Read also: Second home tax increase: Where in France may be affected by new law?

The report also states that the capital is committed to completing a review of its VLC calculations by 2026, which is expected to result in a marked rise in taxe foncière bills for many owners.

A general review of the VLCs, which are outdated due to changes in France’s towns and cities in recent years, has been planned nationwide but has repeatedly been put off; 2026 is now the deadline for all areas. It is in theory possible it will result in a lowering for some properties which are now seen as less desirable than in previous decades when the values were last worked out.

Finally, the report proposes a tax on empty offices in addition to the existing taxe locale sur les bureaux, and to remove the cap on taxe de séjour rates in luxury hotels.

Read also: Explainer: What is France’s taxe de séjour, who pays it and when?

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