The French Government target foreign owners of holiday homes with a draconian Tax grab

Owners of holiday homes in France are set to be targeted with punitive Tax rises announced by Francois Hollande, leader of the new Socialist Government, as they seek to tax so called wealthy foreigners that supported France in the past, in order to reduce France's significant budget deficit.
According to the plans Tax rises will affect foreign-owned second homes in the following areas...

• Tax on rental income is set to rise from 20% to 35.5%.
• Capital gains tax on property sales is set to rise from 19% to 34.5%.

What is even worse is that the Tax rise on rental income will be retrospective as from the 1st of January 2012. The increase in capital gains Tax will be applicable as from the end of JUly 2012, which means in reality that property owners will have precious little time to react by selling their homes.

Foreign holiday home owners already pay 2 other notable Taxes to the French Government called the “Taxe Fonciere” (paid by the house owner) and the “Taxe d'habitation”, (paid by those who live in it).

If this new Tax law is introduced, the rate of French capital gains Tax will be practically double for EU residents on their French property capital gains. Just another pleasure for living in euro-zone. Any country that enjoys a double taxation system can deduct any Tax paid at source in France on French gains from the Tax on the same gains of their own country. However, if the French Tax is higher, no rebate will be due.

The French finance ministry indicated that the new rule would affect approximately 60,000 rental properties in France the owners of which made an average profit of €10,000, equal to a total of €50 million income for the French revenue this year and €250 million in 2013. This is on paper at least, but in reality people will likely vote with their feet if not in the short term the medium term. Who will want to invest in France now?

These short term thinking Tax plans will effectively attempt to penalise people for choosing France as a country to invest in and spend money on holiday, all in the cause of a so called "social charge", which sounds noble, but is likely to do long term damage. What the French Government do not calculate is the massive potential loss to Tourism and future property sales, as the message is clear “Do not invest in France or we will bleed you dry”. 

The country most affected by these measures is the UK, whereby approximately 200,000 British people own second homes, many of which travel using budget airlines. The British treasury recently stated "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.".

Europe is becoming an over-taxed, over-regulated and more uncomfortable (by the day) place to live at present and France has just placed itself towards the top of the list of destinations not to live or invest in.

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