Foreign second-home owners are in an uproar following
the French government's announcement that it will increase taxes on
their properties as early as this month. While François Hollande tries
to plug the massive deficit gap that he has inherited, industry
professionals warn the move could further damage the property market in
France.
The Socialist government plans to hike up taxes on non-resident homes in France
If all goes to plan, second-home owners will be hit with a 15.5 per
cent tax increase, rising from 20 per cent to 35.5 per cent, to be
enforced retrospectively from 1st January. There'll also be an increase
in capital gains tax on property sales from 19 per cent to 34.5 per
cent, coming into force as soon as the end of July - leaving foreign
property owners with little choice but to pay the hefty charges.
The extra costs have been classified as social charges (
les prélèvements sociaux)
and were previously only requested from French residents. It will be
used to contribute to societal funds such as health care in France.
The
second-home charges were part of a 2012 revision of the budget on 4th
July - just days after France’s national auditor declared that the
government has a potential deficit of 10 billion euros. The meeting
confirmed that France would be imposing a total of 7.2 billion euros in
new taxes this year as part of a plan to revive its weak economy.
The steep tax increases on non-resident properties are expected to generate 50 million euros of
government funds in 2012, and 250 million euros in a full year.
Apart from the new enforced social charges, non-resident property
owners already pay two different types of taxes in France. The first is
an annual ownership property tax (
le taxe foncière), paid by the owner regardless of whether the property is occupied by them or rented out. The second is a local residence tax (
taxe d’habitation), imposed on the occupier of a property in which they were a resident on 1st January each year.
According to the UK's
Daily Telegraph,
there are currently around 360,000 non-resident second home owners in
France, and analysts are already warning of the impact the new law will
have on France’s property market. Graeme Perry, a partner at Sykes
Anderson which advises British citizens on French residences, told the
Daily Telegraph:
"If the law is introduced, the effective rate of French capital gains
tax will almost double for EU residents." He said the move may further
damage France's shaky property market, "particularly at the higher end."
Former President Nicolas Sarkozy made similar tax proposals last year, approving an additional third tax akin to the
Foncière and the
Habitation, but decided to scrap the law via an amendment after a wave of opposition from angry foreigners and French living abroad.
UK media have already reported sources within the Treasury saying
that they will challenge any proposal that breaches European single
market laws and anti-discrimination rules.
Last month, British
Prime Minister David Cameron stirred up tension after saying that he
would be more than happy to "roll out the red carpet" for France’s
prosperous high-earners, set to be hit by a 75 per cent tax under
Hollande's new regime.
Katie Williams
