Property Forum: Does 164C affect the 20% on rental income?

This question received through our Property Forum comes from Julia in Monaco.

Does the recent ruling on law 164C have any impact on the flat 20% income tax levied on rental income earned by Monaco residents with rental property in France?

The 164C tax rule basically states that you if you have a home in France that is available to you for part or all of the year, and if you are from a country who does not have a double taxation treaty with France (such as Monaco), you have to pay a French income tax which is equal to 3x the annual rental value of that property.

This tax law was recently challenged by a couple living in Monaco who actually won their case in the Conseil d’Etat which means that it is a final decision, and it had to do with the fact that this law was in breach of the law of the European Union with respect to the following ‘movement of capital shall be without prejudice to the application of third countries.’

Going back to Julia’s question, does this ruling does not have any impact on the flat 20% income tax levied on rental income earned by Monaco residents with rental property in France because the flat 20% is specifically applied for rental properties that are rented for the year, the other is based on a property that is available to you meaning not rented out.

However, property taxes are going to be given an overhaul review which will start early next year starting with the theoretical rental values that these taxes are based on. The goal of this review is to actually make taxation more fair and is scheduled to go into effect by Fall 2018. You can read more detail about this property review here.

A word to the wise, go talk to your financial advisors as they are the experts and everyone’s situation is unique.

Article collaborated by David Dignac, Price Waterhouse Cooper, david.dignac@fr.pwc.com