French holiday homes under attack

French property owners are under attack from penal tax rate increases

In a move certain to anger the 200,000+ Brits who own property in France, newly elected President François Hollande has announced he is set to significantly increase taxes on foreign-owned second homes.

Tax on rental income in France is increasing from 20% to 35.5%, with the Capital Gains tax rate also rising from 19% to 34%.

The increase in Income Tax is to be backdated to 1st January 2012, whilst the deadline for Capital Gains is 31st July 2012 and has seen a rush of property on the market as people try to sell before the new rate comes into force.

These increases are in addition to the recent changes in inheritence tax in France which is complicated in extreme and has also been subject to President François Hollande’s attention (his proposal is to reduce the current tax-free allowance of  €160,000 between parents and children to  €100,000), and with French Inheritence Tax running at between 0% and 60% there are potentially big sums involved.

France already imposes an annual levy of 0.25% on property valued at more than €1.3 million and 0.5% over €3 million.

There’s no doubt that this is bad news for French holiday home owners, but it’s interesting that the rules will not be the same for French nationals and this is surely begging for a challnge in the European Courts. Europe is already looking at the French Inheritence Tax system, and there are early signs that concessions will have to be made but I am sure this is just the start of what could be a rollercoaster ride in tax terms across the Continent.

If you have income or assets abroad and are unsure of the implications, please contact your local Burgis & Bullock office.

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