The Telegraph wails:
British owners of holiday homes in France are to be hit with punitive tax rises under plans announced by the new Socialist government.
Approximately 200,000 Britons own second homes in areas such as the Dordogne and other parts of France, particularly those serviced by budget airlines. Now, however, holiday home owners find themselves in the sights of President François Hollande as he seeks to tax the better-off to reduce France's large budget deficit.
On Wednesday (July 4th), the French government announced it was to increase taxes on foreign-owned second homes. Tax on rental income would rise from 20 per cent to 35.5 per cent, and capital gains tax on property sales would rise from 19 per cent to 34.5 per cent. The extra in each case is being labelled a "social charge".
And how "punitive" are these taxes, pray tell? As per usual, the Daily Mail is slightly more informative:
The new property charges will apply to all home owners - foreigners and French expats - who live abroad and do not pay their taxes in France. From July 1, they will be liable for a 15.5 per cent tax on income from renting their property, and 15.5 per cent on any profits made from selling it.
Hardly "punitive", is it? It's less than you'd pay on an equivalent home/income if it were in the UK.
And how high would the tax have to be before it became unattractive to buy a holiday home in France? Answer: it doesn't matter - the higher the better because the purchase price will fall in equal and opposite measure, it all cancels out. If the tax were £10,000 a year, you'd be able to buy such a house for next to nothing and so have no initial outlay, no mortgage, no risk and every incentive to maximise your rental income (which of course genuinely puts money into the local economy). If the worst comes to the worst, you just abandon it; and if the tax is reduced again you make a nice windfall gain.
Labour latest: you couldn’t make it up
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10 comments:
I'm not particularly pro or anti any tax he may impose but your logic is faulty when you say:
"because the purchase price will fall in equal and opposite measure,"
No it won't. Ordinary locals living and working in France will not be affected so the market price of property will not be significantly affected - except insofar as one group of buyers are discouaged.
Basically he is targetting everyone living outside France but owning a house there - and that must include french ex-pats.
"Ordinary locals living and working in France will not be affected so the market price of property will not be significantly affected - except insofar as one group of buyers are discouraged. "
If the situation in the UK is anything to go by, the second-home buyer pushes up the price of certain types of property - the type suitable for a second home, e.g a cottage in a pretty village - but not others, e.g. an estate house in a town. So increasing the tax on the first type of house will push the price down to the level of the second type, but no further.
If you're tax resident in the UK, then rental income received from renting out a property France is still taxable at your regular UK income tax rate, with any tax paid in France deductible from your liability in the UK.
In other words, the only impact of the tax rise for anyone paying standard or higher rate tax in the UK will be to transfer some of your tax bill from the UK Treasury to the French treasury, which seems like a reasonable call on the part of the French.
"In other words, the only impact of the tax rise for anyone paying standard or higher rate tax in the UK will be to transfer some of your tax bill from the UK Treasury to the French treasury"
Some? surely more than 100% if you pay tax only at the standard rate in the UK.
Bayard,
One difference in France is cultural - rural properties are typically cheaper than town ones. To live in a village (unless you have an estate) makes you a peasant.
I've pondered on why, and the best I can come up with is that they did their post-war town centre planning a lot better than we did.
Interesting.
The British government provides tuition fee loans to citizens of other EU countries to study at English universities, claiming that it would be against EU rules to provide them only to English residents.
So either Mr Hollande is breaking EU rules, or our own government is talking b****it.
TS, I think you were right the first time - it's a cultural thing. The French have always thought the countryside is for hicks and have always aspired to living in the town, hence they care more about their town centres, because they aren't all office and retail deserts, like ours. The British have always had the opposite view and aspired to live in the country and to ape the landed gentry. Quite why the British landed gentry preferred country living to town living, I don't know, though it could be down to density of population - there was more going on socially in the country than in France.
W42, I refer you to B's answer.
JB, it might be trickier than that; a flat local charge might not strictly count as income tax and therefore not be offsetable (available as deduction against cash rental income only), see also B's second reply. And this will be highly embarrassing for those who have so far "forgotten" to tell HMRC about any French rental income.
TS, probably. European towns are by and large much better layouts than English ones, less NIMBYism etc.
AC, our government is lying. For example, the Scottish govt gives free tuition to Scottish students (and I think to European ones) but not to English or Welsh students.
AC, not sure what you're talking about, the problem is your definition of an English/Scottish/EU student. Eligibility for UK fees is dependent on where you (or your parents) are resident, not your ethnicity or citizenship. Loans are only available to UK residents.
An English or French person resident in Scotland is a Scottish student and gets free tuition in Scotland (and possibly England if the Scottish government pays, not sure). A Scottish person resident in England has to pay £9000 to attend university in Scotland. Foreigners like Americans can pay £9000 (or £0) if they have ILR in the UK and live here. They may also qualify for EU fees if they live in the EEA.
B's answer, and others, don't conflict with what I said. I said it would only discourage one section of potential buyers, but thus would not seriously affect house prices.
As was also noted the french tend to prefer small towns to rural properties and they also prefer modern houses to old ones. The french don't do DIY!
The area I know, Normandy, where we recently sold a small house, is full of very cheap older houses in run down and appalling condition. The french don't want them! They don't even understand why the brits and others do want them. They think we are mad not to buy a new pavilion, or have one built, all done and sorted? Meanwhile the small tradesmen love holiday home owners, and it was suggested to us that losing them would seriously affect the local economy.
Many such derelict properties are bought by UK, dutch and Germans as holiday homes because they are cheap and we all have a tradition of house renovation and love the character of the older properties.
So driving out, or discouraging, overseas holiday home owners there is quite different to here in the UK where they compete directly with locals and push up prices.
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