French Real Estate from Paraguay: SCIs, Dismemberment, and Transmission
You live in Paraguay and own an apartment in France. This might be an inheritance, a purchase made before your departure, or an investment property. Whatever its origin, it is almost always the most complex asset in your expatriate portfolio.
Complex because it falls under two opposing logics. France taxes real estate located on its soil, regardless of your residence. Paraguay, however, does not tax any of this: rents, capital gains, and foreign-sourced transfers are irrelevant to it. All taxation of this asset is therefore exclusively French, and this is where everything is decided.
It is also complex because there are numerous optimization tools, such as civil companies, bare ownership, progressive donation, and sale, and a poor choice can cost tens of thousands of euros. This guide covers the issue thoroughly. Given the amounts involved and the technicality, have your plan validated by a notary or a tax lawyer before taking action.
What France levies
On rents
Two schemes coexist. The micro-foncier scheme, accessible for annual gross rents below €15,000, applies a flat-rate deduction of 30%. The régime réel (actual expenses scheme), mandatory above this threshold and optional below it for three years, allows for the deduction of actual expenses: loan interest, maintenance and repair work, management fees, property tax, insurance, and non-recoverable co-ownership charges. As soon as your expenses exceed 30% of the rent, the actual expenses scheme becomes mandatory.
On the net result, two levies are added.
| Levy | Rate applicable to a Paraguayan resident |
|---|---|
| Income tax | Minimum rate of 20% up to approximately €29,000 of net taxable income, then 30%. You can request the application of your worldwide average rate if it is more favorable, by justifying all your income. |
| Social contributions | 17.2%. The reduced rate of 7.5% often cited is reserved for individuals affiliated with a social security scheme of a State in the European Economic Area, Switzerland, or the United Kingdom. A Paraguayan affiliation does not grant this right. |
| Total | Approximately 37% of net rents |
This point deserves to be emphasized, as a lot of erroneous information circulates on this subject: an expatriate in Spain or Portugal indeed bears 7.5%, an expatriate in Paraguay bears 17.2%. The ten-point difference changes the balance of many calculations.
These incomes are subject to withholding tax, in the form of adjustable online installments.
Taxes that apply even without income
Property tax is due by all owners, occupiers, landlords or not, and it has been increasing rapidly for several years. Expect from a few hundred to several thousand euros depending on the commune.
The housing tax on secondary residences remains, while it has disappeared for primary residences. Since your domicile is in Paraguay, your French property is fiscally a secondary residence as long as it is not rented out. In strained areas, communes apply a surcharge of up to 60%, as in Paris.
The tax on vacant housing affects properties unoccupied for more than a year in strained areas, at a rate of 17% the first year then 34% of the cadastral rental value. This is deliberately dissuasive. An empty property combines property tax, vacancy tax, charges and insurance without generating a euro: several thousand euros per year of pure value destruction.
The real estate wealth tax only concerns French net real estate assets exceeding €1,300,000. Your Paraguayan real estate is excluded.
Direct ownership or civil company
Direct ownership is the default situation. It costs nothing in structure, the declaration is made on your own tax return, and it grants access to the capital gains regime for individuals, which is the most favorable for long-term ownership. Its weakness is rigidity: transferring requires a notarial deed per property, and co-ownership leads to joint ownership, a classic source of blockages.
The société civile immobilière (SCI) adds a layer between you and the property. Its advantages are real and come in three points. It allows for the donation of shares rather than property quotas, thus enabling progressive transfers, in tranches calibrated to the allowances. It allows for a discount for illiquidity of about 10 to 15% on the value of the shares, accepted by the administration, which reduces the taxable base by the same amount. And it groups several properties into a single entity, with a single accounting and a single transfer.
On the other hand, there is a structural cost of €500 to €1,500 per year, minimal formalism, and above all a trap to be aware of: contributing a property you already own to a civil company is treated as a sale. The latent capital gain becomes due, and registration fees may be added. The civil company is optimal when it acquires the property from the outset; for a property already owned, the operation is calculated on a case-by-case basis with a notary, and the calculation is often unfavorable.
Income tax or corporate tax
This choice has the most significant consequences, and it is almost never reversible.
Under income tax, the company is transparent: rents are taxed at the associates' level as with direct ownership, and most importantly, the sale falls under the individual's regime, with allowances for the holding period.
Under corporate tax, the company depreciates the property, which significantly reduces taxable profit for twenty to forty years. The annual saving is real and attractive. However, it is fully paid upon resale, as the capital gain is calculated on a cost price reduced by all depreciations made, and no holding period allowance applies.
An example illustrates this. Property acquired for €300,000, depreciated by €200,000 over twenty years, resold for €400,000. Under corporate tax, the accounting capital gain amounts to €300,000 and is subject to approximately 25%, or €75,000. Under direct ownership or a company subject to income tax, the capital gain is €100,000 and is fully exempt from income tax after twenty-two years.
The conclusion is clear: corporate tax is only justified if you will never sell. For an expatriate whose property will eventually be sold or transferred, income tax is the default choice.
Capital gain on sale
The calculation
The gross capital gain is the difference between the selling price and an increased acquisition price. This increase is generous: acquisition costs at a flat rate of 7.5%, and works at a flat rate of 15% of the purchase price without justification, provided the property has been held for more than five years, or based on actual company invoices if more advantageous.
Two distinct allowances are then applied, at different rates.
| Holding period | Income tax (19%) | Social contributions (17.2%) |
|---|---|---|
| Years 1 to 5 | No allowance | No allowance |
| Years 6 to 21 | 6% per year | 1.65% per year |
| Year 22 | 4% — total exemption achieved | 1.60% |
| Years 23 to 30 | — | 9% per year — total exemption at 30 years |
A progressive surtax of 2 to 6% is added when the taxable capital gain for income tax exceeds €50,000.
The €150,000 exemption, often announced as lost
Here, two frequently confused mechanisms need to be distinguished.
The total exemption for the former primary residence requires the seller to reside in a European Union member state or a country linked to France by administrative assistance and collection agreements. Paraguay falls into neither of these categories: this mechanism is not available to you.
The exemption capped at €150,000 of net taxable capital gain follows a different logic. The text targets non-resident individuals who are nationals of a European Union member state or the European Economic Area. The criterion is nationality, not residence. A French national living in Paraguay remains a national of a member state.
Two additional conditions apply: having been tax-domiciled in France for at least two continuous years at any point before the sale, and respecting a delay after departure, except when you have retained free disposal of the property. The exemption applies to one property per taxpayer, and a married couple can raise the ceiling to €300,000.
In other words, the assertion that a Paraguayan resident would not be entitled to any exemption is incorrect. Have your eligibility verified by a notary before signing the preliminary sales agreement: the basis for the exemption must be included in the deed, and it will be too late afterwards.
The tax representative
Residing outside the European Economic Area, you must appoint an accredited tax representative as soon as the selling price exceeds €150,000. They guarantee the payment of tax and assume responsibility. Expect 0.5 to 1% of the price, or a flat fee of a few thousand euros.
Good news rarely mentioned: this obligation ceases when the capital gain is fully exempt due to the holding period. After thirty years, no more representative, so no more fees.
A quantified case study
Apartment acquired for €150,000 twenty-five years ago, resold for €350,000.
| Step | Amount |
|---|---|
| Increased acquisition price (7.5% fees and 15% works) | €183,750 |
| Gross capital gain | €166,250 |
| Income tax after 25 years | €0 (exemption acquired at 22 years) |
| Social allowance after 25 years | 55% — residual base €74,813 |
| Social contributions at 17.2% | €12,868 |
| Tax representative | approximately €1,750 |
| Total cost of sale | approximately €14,600, or 4.2% of the price |
At thirty years, everything disappears: no tax, no social contributions, no tax representative. Patience is directly rewarded here.
Transferring: four paths
Doing nothing has a real and often overlooked merit: the latent capital gain is purged upon death, with heirs taking over the property at its value at that time. In return, inheritance tax applies at a scale of 5 to 45% beyond €100,000 per child and per parent. For a property worth €500,000 and two children, this represents approximately €60,000.
Donating bare ownership remains the most effective path. At age 50, the tax scale values bare ownership at 40% of the property: for a €300,000 property, this amounts to €120,000 divided between two children, or €60,000 each, fully absorbed by the allowance. You retain usufruct and rents, and usufruct is reconstituted upon your death without any duties. The mechanism is detailed in our guide to property dismemberment.
Progressively donating shares of a civil company adds the illiquidity discount and allows each donation to be calibrated to the available allowances. With two parents and two children, the transferable allowance reaches €400,000 per fifteen-year cycle, plus the family gift of money. Over two cycles, the capacity for untaxed transfer far exceeds the value of an average Parisian property.
Selling then donating the proceeds becomes the best option in a specific scenario: low rental yield, energy efficiency works planned, and ownership for more than twenty-two years, which makes the sale inexpensive. You recover capital, you transfer it within the allowances, and you reinvest the balance in assets that are not taxed in Paraguay. The terms are covered in our international donation guide.
Managing from 10,000 kilometers away
Four organizational points deserve to be settled once and for all.
Rental management goes through a property manager. Tenant search, lease, inventory, collection, unpaid rents, emergencies: none of this can be managed from Asunción. Expect 6 to 10% of rents, plus approximately one month's rent for each relocation. This is a necessary cost, not a luxury.
Tax declarations are filed with the non-resident individual tax service. An accountant familiar with this clientele costs €500 to €1,500 per year and helps you avoid oversights.
A French bank account remains indispensable for collecting rents and paying taxes, the manager, and works. Some traditional banks close accounts for non-residents outside the European Union; online banks are generally more flexible.
Finally, plan for a power of attorney. Without it, every notarized signature requires a visit to the consulate, a postal dispatch, and weeks of delay. A general power of attorney entrusted to a trusted person, established by a notary and then apostilled, costs a few hundred euros and will save you considerable time.
What to do based on your situation
| Situation | Orientation |
|---|---|
| Property under €300,000, children in France, you are 45 to 55 years old | Bare ownership dismemberment. Bare ownership falls within the allowances, and a civil company would not offer enough to justify its cost. If the property is not rented, consider selling and donating the proceeds instead. |
| Property over €300,000, or several properties | Civil company subject to income tax, then dismemberment of shares. The discount and divisibility of shares make the difference. Be mindful of the contribution cost if the property is already owned. |
| Profitable rental property you wish to keep | Keep it, either through direct ownership or in a civil company subject to income tax, and initiate dismemberment before age 55. Rents are subject to approximately 37% in France and nothing in Paraguay. |
| Low-profit property, classified F or G, works needed | Sell. Beyond twenty-two years, the exit cost is low. An energy renovation of €20,000 to €50,000 to maintain a 2% yield is rarely justified. |
| You are over 70 without dismemberment in place | The scale then values bare ownership at 70%, which significantly reduces the interest of the operation without nullifying it. The purging of capital gains upon death and a life insurance policy taken out before age 70 may be a more appropriate response. |
Six mistakes to avoid
- Stopping all declarations in France. Leaving France does not remove the obligation to declare income from French sources. Omission exposes you to penalties of 10 to 40% and late interest.
- Counting on 7.5% social contributions. The applicable rate from Paraguay is 17.2%. A ten-point difference on rents as well as capital gains changes the conclusion of many decisions.
- Choosing corporate tax for depreciation. The annual saving is real, but it is fully recovered upon resale. This regime is only suitable for perpetual ownership.
- Waiting to dismember. Bare ownership is worth 40% at age 45 and 70% at age 75. Each lost decade increases the taxable base and eliminates an allowance cycle.
- Ignoring the energy calendar. G-rated homes can no longer be rented, F-rated homes will be banned in 2028, and E-rated homes in 2034. For an old property, the question arises now, not when the tenant leaves.
- Leaving a property vacant. Between property tax, vacancy tax at 17% then 34%, charges, and insurance, an empty dwelling costs several thousand euros per year without compensation. Rent or sell.
Conclusion
Your French property is the only part of your assets that Paraguayan residency does not protect. Paraguay is completely neutral with regard to it, meaning France applies its rules without sharing: approximately 37% on rents, a capital gains regime that becomes very favorable over time, and potentially heavy inheritance taxes.
Three principles govern what follows. Act early, because the effectiveness of dismemberment diminishes with each passing year. Choose the right structure: income tax in almost all cases, or a civil company when the value or number of properties justifies it. And know when to sell when the property is no longer performing, which is common after twenty-two years of ownership and with an unfavorable energy performance diagnosis.
Every euro that leaves French real estate then enters a framework where it is no longer taxed. This is where Paraguayan residency takes over.
Are you preparing your tax relocation to Paraguay? Contact us: Paraguayan tax residency from €1,400, or €1,800 with the Express package which can be finalized in a single 2-day trip on-site, bank account opening at €250, creation of a US LLC and DNIT accounting at €30 per month. Write to us on WhatsApp at +595 971 362 302 for a quick response in French.