France To Slap Tax On Foreign-Owned Second Homes

[nmarks]

http://www.channelnewsasia.com/stories/afp_world_business/view/1128259/1/.html

PARIS : France is to hit non-resident owners of 360,000 second homes - many of them British or Dutch - with a new tax equal to 20 percent of the properties' rental value, under a draft law unveiled on Wednesday.

Property dealers immediately warned the measure, designed to cut France's yawning budget deficit by about 176 million euros per year, would have a chilling effect on the holiday home market in rural regions like the Dordogne.

Some also questioned whether it might breach European Union laws intended to ensure the free movement of capital, despite also applying to French citizens who are resident abroad but keep a second home in France.

The draft, which was approved by President Nicolas Sarkozy's cabinet on Wednesday and is expected to pass parliament in time to become law in 2012, says second home owners should help pay for French public services.

It is part of a package of measures to compensate France's overstretched coffers after an increase in the threshold for a supertax on the rich.

"Being owner of one or more second homes implies that one benefits directly or indirectly from local and national public services, like the police, legal system and national infrastructure," the finance ministry said.

France is a popular destination for tourists from Britain and the rest of Northern Europe, and many choose to stay on, buying up relatively cheap homes in rural areas - without always becoming French income tax payers.

While second-home owners already pay local property tax, if their income is declared abroad, they do not pay the same tax as permanent residents.

For the government, this is a loophole to plug, but for the thousands of French estate agents who make a living selling to foreign buyers, any new levy can only depress the lower end of the market.

Experts said such a tax could hit British and Dutch retirees and summer visitors who flock to the south and southwest to enjoy the warm climate and fine cuisine, while having little impact on the international super-rich.

Thibault de Saint Vincent, chairman of luxury property agency Barnes, said that Russian, Chinese and Gulf Arab tycoons would still snap up Paris flats, Alpine ski chalets and Cote d'Azur villas.

"An extra 15,000 to 20,000 euros per year won't matter to them," he said.

But property agency Emmanuel Garcin warned: "This new tax could reduce the enthusiasm of foreigners at a time when France is more and more seen as a country of adoption for people the world over."

The law has clearly been written so as not to apply only to foreigners - as this would breach EU law - but also to French citizens who have moved abroad and are no longer French residents for tax purposes.

However, it makes an exception for those who have paid French tax for at least three years out of the previous ten - presumably mostly French citizens - and who would not pay the tax for their first five years abroad.

Paris property lawyer Daniele Siboni predicted the tax would be challenged under European law as discriminatory, and Marion Chapel-Massot of private wealth managers Equance wondered about royal loopholes.

"I wonder if those who belong to foreign ruling families will continue to benefit from a diplomatic exemption," she mused.

The French parliament is due to vote on the tax reform bill in July.

Edited May 12, 2011 by nmarks

[Londonboy]

Do you think this will just be for new purchases?

How about people who have a house there already?

[justthisbloke]

In the UK, isn't the tenant expected to retain 20% of the rent for HMRC if the landlord is overseas?

[Wahoo]

Interesting. This will apply to all second home properties, not just new builds, in France.

I can see this spreading to other countries - like Spain.

As soon as you buy, you are a victim for taxation.

It might also be the signal for a more general property value tax, on your main residence.

[tahoma]

I think I just heard the sound of a lot of smug arseh*les tightening.

When governments get desperate for money, they love it when people have nice big assets that are stuck to the ground. This will put massive downward pressure on holiday home owners.

[Bruce Banner]

A spin off will be to reduce the price of houses for the local population as cash strapped second home owners offload their liability for whatever they can get for it.

[_w_]

http://www.channelne...1128259/1/.html

A reminder of how eminently taxable property is...

[Wahoo]

A spin off will be to reduce the price of houses for the local population as cash strapped second home owners offload their liability for whatever they can get for it.

Yep - can only be a good thing. You need 12 times average salary in some parts of the UK to buy! Outsiders have been greedy and bought second homes as play-things.

[Frank Hovis]

Great news. There's a chill wind blowing from across the channel

[Georgia O'Keeffe]

A reminder of how eminently taxable property is...

No, its another reminder that you just cant trust the Frogs, a blatant attack on hard working entrepreneurial English families, i wouldnt be suprised if theyve also been bankrolling Mr Salmond behind everyones back, If i were knee high to a grasshopper and missing an eye id come back and kick their garlic and oignon munching asses personally

Edited May 12, 2011 by georgia o'keeffe

[_w_]

No, its another reminder that you just cant trust the Frogs, a blatant war against hard working entrepreneurial English families, i wouldnt be suprised if theyve also been bankrolling Mr Salmond behind everyones back, If only i were knee high to a grasshopper and missing an eye id come back and kick their garlic and oignon munching asses personally

[Bruce Banner]

A reminder of how eminently taxable property is...

If it's visible, it's potentially taxable.

[Realistbear]

Do you think this will just be for new purchases?

How about people who have a house there already?

Cue: hideously chilling evil-genius laugh

Muw-huh-huh-huh-huh-huh-haaaaaaaaaaaaaaaaaaaaaaaaaaaaahhh

Edited May 12, 2011 by Realistbear

[Einstein71]

Meanwhile in Spain Capital Gains Tax for non residents is halved and Zapatero declares more tax breaks to attract foreign buyers back into the market !!

I think this tax tells us more about France's isolationist leanings than a possible EU taxation of second homes. Spains economy relies heavily on construction which relies heavily on 2nd homes, they are looking to incentivise 2nd home buying not tax it.

In France it isnt really a major issue because most of the 2nd homes bought are already standing and not new build so has no bearing on the construction sector especially as a lot of Brits decide to do their own renovations rather than use locals.

[Nationalist]

Nice for the French: more tax take, and cheaper houses for the locals. But no benefit to us I'm afraid...

[cashinmattress]

Why do people want to move to France? They like British folk as much as we like French folk, which isn't much.

As for Spain. They will say anything to get their corrupt building sector above water.

I'd say that dream of retiring abroad in relative luxury is dead in the water for the average Brit.

But of course, I never underestimate the propensity for British people to be stupid about property.

Fool me once....

[Ash4781]

Is there not some kind of double tax treaty in place?

[Einstein71]

Why do people want to move to France? They like British folk as much as we like French folk, which isn't much.

As for Spain. They will say anything to get their corrupt building sector above water.

I'd say that dream of retiring abroad in relative luxury is dead in the water for the average Brit.

But of course, I never underestimate the propensity for British people to be stupid about property.

Fool me once....

I suppose you would rather retire to a 1 bed flat in Bradford (no offence to Bradford, please replace Bradfford with any other provincial hell hole in the UK). I personally couldnt think of anything worse than hitting 60 and having to spend my time dodging chavs in the driving rain on my daily visit to Asda

[thod]

Why do people want to move to France? They like British folk as much as we like French folk, which isn't much.

This is not true. There is some apprehension because you are an outsider but they have no strong feelings at all about the English. Much as the English do not really have any strong opinions about Belgians. The locals in the rural places, where the English tend to buy, hate the Parisians. In fact people from the next commune are regarded as slightly foreign. They would much rather see the English buy than some nasty brown coloured person. The rural French are certainly nosey but also respect your right to be left alone. I have never seen any outright racism against the English.

[Patfig]

http://www.channelnewsasia.com/stories/afp_world_business/view/1128259/1/.html

mon dew mon dew

[Bruce Banner]

Nice for the French: more tax take, and cheaper houses for the locals. But no benefit to us I'm afraid...

Brit with second home in France gets burned and has to sell UK BTL at a loss to restore some liquidity .

[Quicken]

They messed this law up with the exemption, but otherwise it's one of the things I have been saying we need here. Roll on a tit-for-tat response in the UK. Ideally, this is just a first step, to be followed by an extension to all non primary residences.

[Bloo Loo]

Meanwhile in Spain Capital Gains Tax for non residents is halved and Zapatero declares more tax breaks to attract foreign buyers back into the market !!

I think this tax tells us more about France's isolationist leanings than a possible EU taxation of second homes. Spains economy relies heavily on construction which relies heavily on 2nd homes, they are looking to incentivise 2nd home buying not tax it.

In France it isnt really a major issue because most of the 2nd homes bought are already standing and not new build so has no bearing on the construction sector especially as a lot of Brits decide to do their own renovations rather than use locals.

of course, you have to make a profit to pay CGT...in Spain????

Zapatero, like all politicians, can create good vibes for the local voters at no cost to anyone....except it adds a few more public sector jobs.

[_w_]

If it's visible, it's potentially taxable.

And it's nailed to the ground; you can't take that one offshore...

Taxing property is like shooting fish in a barrel.

Edited May 12, 2011 by _w_

[_w_]

Meanwhile in Spain Capital Gains Tax for non residents is halved and Zapatero declares more tax breaks to attract foreign buyers back into the market !!

I think this tax tells us more about France's isolationist leanings than a possible EU taxation of second homes. Spains economy relies heavily on construction which relies heavily on 2nd homes, they are looking to incentivise 2nd home buying not tax it.

In France it isnt really a major issue because most of the 2nd homes bought are already standing and not new build so has no bearing on the construction sector especially as a lot of Brits decide to do their own renovations rather than use locals.

Nah, it tells us that France has more confidence in its housing market. And in view of the amount of credit they've been pumping over there they probably think they don't need foreign investors.