It is a residence tax. You have to pay this tax if you own a property and live in it yourself (or have it available for your use, or rent it out on short-term lets). Where properties are rented out long-term, the tenant pays. Taxe d’habitation is determined by local and county councils and is spent on community services by your local municipality. It is paid by the household living in the property on 1st January each year, whether it is an owner or tenant, or by the owner if vacant.
The tax is based on a notional rental value for the property multiplied by the tax rate fixed in the locality. The rental value is assessed by the land registry (cadastre) to which you must send notification of any improvements or changes to the property within 90 days. You may have heard that in October 2017, the French has enacted a law to reduce drastically the taxe d’habitation – but this only applies to primary residences.
It is a land tax, and is paid by the owner of the property, irrespective of who occupies it. The tax is divided into two parts: tax on buildings (taxe foncière sur les propriétés bấties) and tax on land (taxe foncière sur les propriétés non bâties). The latter is no longer levied locally and is levied nationally instead. The tax on buildings is paid on any property that is habitable, whether or not it is occupied. If you sell a property part-way through the year the tax is apportioned by the notary dealing with the sale.
Both taxes apply to non-residents as well as residents. Demands are sent annually (from September each year). The amount must be paid by a specified date, usually in October (taxe foncière) and November (taxe d’habitation) but varies from place to place. Failure to pay on time incurs a 10% penalty.