Second Homes Abroad: First the Dream, Then the Tax Implications
French people who buy property in Spain, Portugal, Italy, or Greece are no longer looking for the cheapest price per square meter. A series of studies by Green-Acres shows that they are buying into a lifestyle, and that more than one in two are already planning to retire there. This shift changes everything: owning a vacation home is not the same as owning a future primary residence.
Price is no longer the top consideration
Green-Acres, a platform specializing in international real estate, analyzed the search trends and motivations of its French users in four countries. The most striking finding concerns Italy: 58% of buyers choose it for its lifestyle or personal ties, while price ranks last, at 12%.
Elsewhere, the order of importance varies, but the reasoning is similar. In Greece, lifestyle accounts for 38% of the motivations and climate for 24%, with Crete alone accounting for more than 40% of French searches. In Portugal, one in two French people are looking at the Algarve, and the pace of life ranks as the top criterion, ahead of cuisine or cultural heritage. Spain remains the most pragmatic choice, balancing quality of life, climate, and value for money: two provinces, Girona and Alicante, account for 57% of searches.
“Buying a second home abroad is no longer just a leisure investment; it’s often the first step toward a new life,” says Benoît Galy, founder of Green-Acres. The numbers back him up: more than half of buyers say they are planning to retire or settle there permanently. It should be noted that the study comes from a real estate listing site, whose interest lies in the growth of this market. The trends it describes, however, align with what specialized notaries are observing.
What You Pay After You Sign
The purchase price is only half the story. Each country imposes a local property tax—the IBI in Spain, the IMI in Portugal, the IMU in Italy on second homes, and the ENFIA in Greece. Added to this are condominium fees, insurance, the cost of maintaining a home that’s unoccupied for ten months a year, and the actual cost of managing it remotely. For a property valued at 250,000 euros, an annual ownership budget of 3,000 to 5,000 euros is not at all unusual. Purchase costs, on the other hand, vary much more widely than in France: you’ll need to inquire about them on a country-by-country basis before making an offer.
The IFI Doesn't Stop at the Border
This is the fact that buyers most often discover after the fact. A French tax resident is liable for the real estate wealth tax on their entire global real estate portfolio, provided its net value exceeds 1.3 million euros. The house in Tuscany counts toward the tax base, just like the apartment in Paris.
The same logic applies to rental income. If it is received abroad, it is taxable in the country where the property is located, but must still be reported in France. Depending on the applicable tax treaty, double taxation is eliminated either through a tax credit equal to the French tax or through the effective rate method, which does not tax the foreign income but increases the rate applied to the remaining income. This second mechanism surprises many taxpayers because it increases their tax liability without any additional income being taxed in France.
Finally, a word about short-term rentals, which are often presented as a way to recoup the cost of the property. Major cities in southern Europe have significantly tightened regulations in recent years, and several municipalities have put a freeze on issuing new licenses. Relying on rental income to offset the cost of a purchase requires checking local regulations—municipality by municipality—and accepting that they may change.
Inheritance: The Real Technical Issue
This is where things get complicated, and this is where you can’t just wing it. Since the 2012 European regulation, the law governing inheritance is that of the deceased’s last habitual residence, regardless of where the assets are located. A French citizen living in Portugal will therefore have their estate settled according to Portuguese law, unless they have designated their home country’s law in their will.
This is not a theoretical issue. Many foreign legal systems do not recognize a statutory share of the estate as defined by French law, which can result in children being disinherited. In 2021, the French legislature created a right to compensatory distribution for aggrieved children, but it applies only in certain circumstances.
Be careful not to confuse two distinct issues: the European regulation designates the applicable civil law, not the country that will collect the tax. From a tax perspective, France taxes assets located anywhere in the world if the decedent was a resident, or if the heir was a resident for six of the last ten years, with credit given for taxes paid abroad. However, this requires that an inheritance tax treaty exist between the two countries, which is far from always the case. In such cases, the two tax systems may partially overlap. This is the kind of verification that should be done before making a purchase—with a notary who handles international matters—rather than at the time of death.
Three questions to ask yourself before visiting
: How much does it cost to own the property each year, excluding mortgage payments? How will the property be transferred, and under which law? And most importantly: What happens if your life plan doesn’t pan out? Selling a country home in Greece or Puglia rarely takes just a few weeks, and the capital gains will be taxed in the country where the property is located, sometimes with a withholding tax on the sale price for non-residents.
None of this prevents you from buying. These three answers simply determine whether you’re buying a home or a time bomb.
