Monday 9th July 2012

New taxes to be applied on foreign-owed property in France

France’s new Socialist government recently announced that they would be implementing tax increases on all expatriates who owned property in France.

Last Wednesday President François Hollande announced that taxes on foreign-owned holiday homes would be increased from 20% to 35.5%, representing a sudden increase of 15.5%. In addition to this, property gains on any foreign owned properties will also be increased by the same amount, from 19% to 34.5%. The sudden tax increases, which the French government refer to as “social” charges, are believed to represent a move by Hollande to tax wealthy expatriates who on living on French soil. The ministry in France estimate that the new taxes will increase French revenue by €50 million in the current financial year and €250 million the following year.=

At present, experts believe that the higher rental charges will be applied retrospectively, so all non-resident property owners who base themselves in France can expect the higher rental tax charges to be applied from the 1st January this year. The new capital gains tax rate is expected to be applied from next month, meaning property owners will have little time to escape the increased tax by selling their homes before the plans are implemented. However, there are currently plans to challenge the proposals, which many people argue are unfair and in breach of the anti-discrimination regulations and European single market laws. A source from the UK treasury last week stated: “A Treasury source said on Wednesday night: “We will need to study the details. But we will of course challenge any proposal which breaches European single market laws and anti-discrimination rules.”

It is believed that the proposals are part of bigger plans for the French government to raise the €7.2 billion they need to overcome the current deficits. The government in France has also revealed plans to force an additional levy on wealthy individuals who earn a net income of €1.3 million or more per year.

It is anticipated that expatriate retirees will be worse hit by the proposed tax changes. Those individuals who live in France for over six months per year will be the hardest hit, as the new wealth tax will be applied to their international wealth, including properties, investments and cash reserves they hold in both France and abroad.

Read the full article: http://www.bbc.co.uk/news/business-18722065

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