What annual taxes charge rental investments

It’s very important to know the tax regulations of the country where you are investing. Before you even consider a particular investment, find out what taxes you’ll have to pay, how they are calculated and how it works depending on whether you are a company or a private person. You should know that the taxes you pay at the time of purchase are just the beginning of it: we’ve learnt that lesson recently while looking into how to fill in our tax return for rental income.

What I am going to say here is about our experience in France but it’s probably a good example anyway. The first tax that you will have to pay if you own a property in France, whether it’s an investment or not, is what I call the owners’ tax (on the Internet I found the translations “property tax” or “real estate tax”). Basically, it is the tax you pay every year for owning a property on January 1st.

Based on the type of property and the town where it is located, you pay a different amount in owners’ tax. For example, we paid almost 650€ per studio and they’re only 19 m2 in a medium sized-town. What a serious blow in our cash flow… I called the owners’ tax agency in the town where our flats are located and asked them what it was used for: part of it is a handling fee, part of it goes to garbage pickup and the rest is distributed to various local public administrations.

So, that would be the first tax to take into account when you calculate your cash flow return on a particular investment. Now comes the real stuff: income tax! You will learn about it in my next post.