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France: The French viager

WHAT IS A VIAGER?

A viager is a method of selling a property. The owner sells the property for a lump sum normally between 15 and 30 per cent of the value of the real estate, plus a monthly or quarterly sum set for the rest of the life of the vendor.

In the UK the monthly sum is called an annuity. This annuity is normally index-linked to real estate prices.

The lump sum received is called a bouquet. The purchaser (who provides the lump sum and the annuity) is called the débirentier. The vendor/annuitant is known as the crédirentier.

It is very common for individuals over the age of 70 to consider such a transaction, and it is particularly popular on the Riviera.

The advantage of selling a property this way is that the viager enables you to receive part of the capital tied up in your house, while also allowing you to live there rent-free. It then provides you with a regular income.

In France, most transactions are undertaken by individuals, although insurance companies can also provide a viager. Non-residents can also sell property using the viager method under French law.

A son or daughter can enter into a viager with their parents. The parents would then have a usufruct over the property for the rest of their lives.

FRENCH TAXES PAYABLE

The lump sum would normally be tax-free as the sale of the principal private residence in France. Part of the annuity is taxable, and part is tax-free. The amount of the tax-free allowance can vary from 30 to 70 per cent according to the age of the crédirentier when the transaction is entered into.

If the individual is under 50 years old, 70 per cent of the annuity is liable to taxation. Between the ages of 50 and 59, 50 per cent is taxable. Between the ages of 60 and 69, 40 per cent is taxable. If aged over 69, only 30 per cent of the annuity is liable to French income tax.

The real estate can be sold to friends and relatives, which can be quite useful if the vendor is not in good health, as the entire transaction avoids the payment of French succession taxes.

The annuity is not declared in the annuity section of the wealth tax return of the recipient.

ANNUITANT’S SECURITY

The annuitant (crédirentier) is the person who has sold the house, and is to receive the monthly payment. In the event that the purchaser fails to make a monthly payment, the crédirentier can recover the full ownership of the property without having to pay back any part of the lump sum. This acts as a great encouragement to the débirentier (buyer) to ensure that they keep up with all the payments.

AN EXAMPLE

The price of the lump sum and annuity would depend partly on the value of the real estate, and partly on your own age.

Assume that a widow/er aged 70 lives in a villa worth €100,000. They could sell the property for €20,000, and receive an annuity each month of €250 (equivalent to €3,000 p.a.). The annuity is payable for the rest of their life. If they live to over 100, it means that they will receive this payment for 30 years. It will be index-linked as described earlier.

More pages

Page 1: WHAT IS A VIAGER?
Page 2: POTENTIAL PITFALLS

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