Martinique: Taxes and Costs

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Rental income tax is surprising low in Martinique

Income Tax

The taxation structure is largely the same as in mainland France.

The net income received by a non-resident is subject to a minimum income tax rate of 25%, unless the taxpayer can prove that, if he had been resident in France, his effective rates of taxation (on his worldwide income) would have been lower than 25% (which is unlikely). This rate applies to both furnished and unfurnished rentals.

An important decision needs to be made as to whether to let furnished or unfurnished, which has implications a) for taxation, primarily as to deductions allowed, and b) for the tenant’s rights vis-à-vis the landlord.

Furnished property, which includes bed and breakfasts and gites (self-catering holiday cottages), is taxed under the business profits heading of income tax (but not as corporate income). If the gross furnished rental income is less that €76,300 per annum, a flat 72% can be deducted to cover all expenses and claimable deductions (which simplifies book-keeping) and the balance (i.e., 28%) will be taxed at the prevailing rate i.e., taxed at 25% of income, i.e., gross rental income is taxed at 7%.

Unfurnished lettings are taxed under income tax as ‘real property income’. In arriving at net rental income, deductions can include repairs, maintenance and improvements (excluding construction), local taxes, employee costs, mortgage interest expenses, and 14% of the gross annual income (to cover management fees, depreciation allowances, and insurance costs). If revenues are less than €15,000, this 14% deduction is increased to 40%.

Important: Foreigners resident for tax purposes in countries with which France has no double taxation treaty are assessed for French rental income tax on a notional income basis (revenu forfataire) equal to three times the notional rental value of the homes available to them in France, according to Article 164C of the French tax code (this applies whether or not they actually derive any income from the properties in France).

Property Taxes

There are 2 types of property taxes in France, the axe d'habitation and the taxe foncière. Whoever actually resides in a building is obliged to pay the tax d'habitation. Generally, rental leases also provide that the tenant will reimburse the landlord for the taxe foncière, which is otherwise payable by the owner of the property. The tax foncière is a combination of tax for the building (taxe foncière bâtie) and for the land (taxe foncière non bâtie).

Wealth Tax

Wealth tax applies once French assets exceed FF4.7 million (€720,000). It is an annual tax, with a top rate of 1.8%.

Partnerships and Sociétés Civiles Anonymes as ways of holding property. The rules here are the same as in France – please see under “France”.

Capital Gains Tax

EU residents and residents of France pay 16% on the net gain, after inflation relief, and after deduction of acquisition and improvement costs (the default deductions under these two headings are 7.5% and 15% respectively, but if invoices can be produced, more may be allowable). For both residents and non-residents, discounts of 10% a year are allowed after the fifth year of ownership, with the effect that after 15 years no gain is chargeable to tax.

Properties which have been used as a principal residence from the date of purchase, or for a mimimum of five years, are exempt from CGT.

French residents pay an extra 10% over and above the CGT, in French National Insurance, making their effective CGT rate of 26%. Old age pensioners and invalids, even if non-resident, are exempt from CGT.

However, owners who are not residents of an EU country pay CGT at a rate of 33.3%, subject to any applicable double tax treaty.

Those who own their properties through a Société Civile Immobilière (SCI) (which is not subject to corporation tax) are, as shareholders, individually liable for payment of CGT.

Martinique - more data and information

• How landlord-friendly is the law in Martinique?

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