Local Property Taxes: How to Understand and Calculate Them?
What is a local property tax?
Local property taxes are taxes collected by local governments (municipalities, intermunicipal associations, departments, and regions) to fund local public services: schools, roads, sports facilities, waste collection, and urban development.
They relate to the ownership or occupancy of real estate: apartments, houses, parking spaces, commercial spaces, land, etc. The main ones for an individual are:
- Property tax (on developed or undeveloped properties);
- The housing tax on second homes;
- The TEOM (household waste collection tax) or, in some municipalities, the REOM;
- Taxes on Vacant Housing.
Each tax has its own tax base, but they are all based on the cadastral rental value of the property and on rates set by local governments.
How does property tax work?
Property tax is payable by any owner (or beneficial owner) of real property as of January 1 of the tax year, regardless of whether the property is occupied, rented, or vacant.
It applies to most properties that are “fixed to the ground” and qualify as buildings: apartments, houses, parking spaces, outbuildings, commercial premises, and certain parcels of land.
His calculation is based on two factors:
- The property’s assessed rental value: this is the theoretical annual rent the property could generate if it were rented; a 50% deduction is applied to account for expenses (maintenance, insurance, management, etc.);
- The tax rate, which is set each year by local governments (municipalities, intermunicipal associations, and departments).
Good to Know : The amount of the property tax = assessed rental value × 50% × the approved tax rate.
In the event of major renovations (expansion, adding a story, change of use, etc.), the owner must report them: the new rental value will not be taken into account until January 1 of the following year.
What property tax exemptions or reductions are available?
There are many situations in which a property owner may be eligible for property tax relief. These programs may take the form of a full exemption, a temporary exemption, or a partial reduction, depending on the owner’s profile, income, or the characteristics of the property.
Exemptions Based on Personal Circumstances
Some people may be completely exempt from property tax on their primary residence. This applies, in particular, to:
- Homeowners who are over 75 years of age as of January 1 of the tax year, provided their income is below the statutory limits;
- Recipients of the Solidarity Allowance for the Elderly (Aspa) ;
- Recipients of the supplementary disability allowance (Asi) ;
- Recipients of the disability allowance for adults (AAH), also subject to means testing.
When the criteria are met, the tax authority automatically applies this exemption.
Temporary Exemptions for New Construction or Renovations
Certain situations may qualify for a temporary property tax exemption:
- New construction, reconstruction, or additions are eligible for a two-year exemption, effective January 1 following the completion of the work (a declaration must be filed within 90 days);
- Major energy-efficiency improvement projects may qualify for a tax exemption of up to three years, provided the local government has explicitly approved it.
These measures are intended to encourage construction and renovations that improve the energy efficiency of homes.
Tax Relief for Social Reasons or Due to a Vacant Residence
There are other measures that can help reduce property taxes:
- Homeowners between the ages of 65 and 75 are eligible for an automatic tax credit of 100 euros, subject to income requirements;
- Vacant housing units may be eligible for a tax abatement when the vacancy is beyond the owner’s control, lasts at least three consecutive months, and affects all or part of the property. This tax abatement is not automatic and must be requested by December 31 of the year following the vacancy period.
