Can you arrange the finance for the purchase?
As part of the service offered to purchasers we are able to assist in organising any loan requirements either coupled with a 5 year study or not.
In order to avoid any conflict of interest we don't work with a favoured partner but we will use our contacts to source the most appropriate lender in the area. This will usually be one of the big 3 lenders to agriculture.
How much finance can I get on a farm?
French banks finance all projects on an ability to repay basis rather than a gearing (client capital/finance) ratio.
Assuming that you have no other source of income or capital assets within France, the profitability of the farm will be assessed. This usually involves analysis of the previous occupant's last 3 years financial results and an economic study over the next 5 years for the applicant (We are able to establish a 5 year plan for our clients). From the resulting EBITDA an allowance for living expenses and a margin of security/allowance for reinvestment will be deducted. The remaining amount will then be used along with an assessement of risk to determine the farm's ability to support repayments.
As an example, a 110 ha beef farm selling weaned calves would be expected to produce an EBITDA of circa 50 000 €. Assuming 1 family with 3 children to support, drawings of 20 000 € would be reasonable. Deducting an allowance of 20% margin of secruity reinvestment the maximum remaining to support loan repayments would then be 20 000 €. For a 20 year repayment loan secured against the land at an interest rate of 3.2% including life insurance, the capital amount that could be borrowed would then be approximately 300 000 €. Dont forget to allow for the costs of purchase fees, livestock, machinery & working capital when looking at the capital cost of taking on the farms shown on the site (usually indicated in the farm report)
Could you indicate your fees applicable to farm sales please?
It is now the law in France that a scale of fees be published on any property agency website, so with pleasure, here they are:
As a general rule, to avoid the payment of stamp duty on top of the fees, commissions are usually paid by the purchaser. On sales of company shares (GFA, SCEA etc) however,. there is no stamp duty. The fees are therefore sometimes paid by the vendor.
Fees are always paid to registered agents by the Notaire responsible for the conveyance on production of an invoice signed by the payee. If you are asked to pay commission fees by any other means be very wary.
Fees scales for sales of land & real estate are as follows:
Sales to a value of 250 000 € : 7% ex VAT ; 8.372% including VAT, minimum 4 186 € including VAT
From 250 001 € to 500 000 € : 6% ex VAT ; 7.176% including VAT, minimum 20 930€ including VAT
From 500 001 à 1 500 000 € : 5% ex VAT ; 5.98% including VAT, minimum 35 880€ including VAT
1 500 001 € and over : 4% ex VAT ; 4.784% including VAT, minimum 89 700€ including VAT
Tenancy Negotiations: One year’s rental payment with a minimum of 2 000 € (Two thousand Euros) ex VAT.
How much room for negotiation is there in these prices?
Interesting and direct question - Its impossible to give an answer that will apply to all properties. Most french sellers tend to put what they consider to be a fair value on their property with only very small amount of manoeuver. Some properties have been valued by an independent valuer; However, as everyone knows anything is only worth what someone else is prepared to pay for it, and in today's market there are less people out there prepared, or able to pay anything at all, so to answer your question, we will guide you but don't expect to pay the asking price, a 5 - 10% reduction could be hoped for.
Thank you for the details of the property. You have EBE followed by a figure. Can you tell me what EBE means?
EBE stands for ‘excedente brut d’exploitation’ It is the equivalent of EBITDA in English. This is the standard measure of gross profit for any business in France. It is the trading surplus (or deficit) prior to management and investment income and depreciation. i.e. Profit that must serve to pay the farmer, repay any annuities, allow for depreciation of assets and show a return on investment. It is the key figure used by banks to assess the borrowing potential of a business and an investor to assess the level of risk.
How do I know what's included in the price of the property shown on the web site?
We indicate a price for the land and/or buildings and house only. We will supply an inventory of livestock, deadstock and machinery available with the farm on request, but you will know that a farm requires a certain amount of stock and equipment in order to run it, and this can be bought either on or off the farm. We are happy to advise on capital requirements for any given property.
Do I need a farming qualification to farm in France?
If you are applying for state aid, for instance the young farmers scheme, yes. Contact us via the contacts page for details. If you are not applying for state aid then no qualification is required, however an application for the right to farm the land must be made by those that do not have either an agricultural qualification, or are able to prove 5 years professional experience over the past 15 years. The right to farm is usually granted unless there are 2 candidates, in which case the more qualified will be given the authorisation. Over a certain surface area (102 Ha in the South Vienne)an
Is there decoupling in France as in the UK
Yes, but there are some big differences that are too complex to cover here, notably in the annual claim and transfers. The main differences though are that there are still coupled payments for ewe headage (up to 24€/head), suckler cow premium (up to 187€/head), slaughter premium (up to 50 €/head) and protein crop area payments, along with several other niche production and extensification payments
Hello, Ive heard of a 40% taxation rate in France is this true?
Yes and no! It varies between 41 and 43 % and is in fact the equivalent of UK National insurance contributions. But the rate is calculated on the net profit of the business. It is, in itself a business cost, effectively reducing the taxable profit. It therefore only ever works out at 28% for an owner operator.
There are also many ways to mitigate the cost, some are schemes provided by the government, others are simply ways that generate costs for the business without the equivalent cash outgoing for its owner, for example depreciation, self paid rentals et.c. France-Farms always advises its clients on the most tax efficient way to purchase and run the farm and other businesses we deal with.
Can I roll over my capital gain from the UK?
We are competant to advise on French taxation matters, but this is a question relating to the UK. As far as we know, and we have several clients that have done it, it is possible to roll over a gain from the sale of land or agricultural buildings. The same may not be true though for sale of unrelated assets such as shares or second homes.
Are there any other costs on top of the advertised price of the farm ?
Yes, we always include our own fees in the price, but there is stamp duty at 5.7% on most property transactions with the exception of properties that are owned by a VAT registered entity (person or company), in this case there is VAT to pay, but if the purchaser registers for VAT this can be claimed back. Properties bought through the SAFER are also exempt from this tax, but the SAFER will charge a fee of at least the same amount giving no saving. There are also Notaire's fees and local taxes of a further 2 to 2.5% dependent on the value of the property. Allow 7.5% in all for any purchase.