Capital Gains Tax in France was always punitive - when we first bought our place it was 33 years before we could have sold it "tax free" if it had been classed as a second home at that time which, of course, it wasn't. As Brian has outlined some people need to move from a property which has been their first home for many years (as in our case) and it then gets classed as their second home so they get clobbered. You also can't offset the considerable time and money you've poured into the property against any increase in value unless you have receipts from a registered builder who has carried out the work.
French taxes as a whole are punitive anyway - particularly for the French. They could do with overhauling their entire tax system to make it worthwhile for their own people to work long hours and to take on employees. That would make a huge dent in the black economy and produce more income for the exchequer at a stroke. Don't think they'll do that though.
The nonsense when someone books a holiday in France with having to pay "tourist tax" to the owners for each adult per night in many areas has always made me wonder whether the government wants to encourage tourists to visit France. It must cost more to collect this ridiculous tax than they bring in and increasing tax on rental income will probably mean that the price of holiday rentals will increase thus depressing an already struggling market.
If CGT does go up we'll probably end up not selling, returning to France when we're able to, registering the house as our first home again and then selling it so that in our case at least the French government will get no tax at all instead of collecting a reasonable amount in the relatively near future (if we were able to find a buyer of course and there's no guarantee of that in the present economic climate).
Chatting with friends the other day, one or the other knew somebody who had left France for mainly professional reasons since salaries are better and taxes lower, thus giving them a chance to build up some capital. Quite a few of them have kept a house in France for when they retire, they may be returning for holidays, letting family use it for the same, renting out, or other means of keeping it. They are expats so the tax is going to hit them and given that some of them have 20 plus years until they will definitely return home there is now uncertainty. We were talking about that because if my OH finds a job outside France, unless she has a way of commuting every few weeks then we will have to leave our house but will not sell, basically retain it as home base to be there whenever we can. Nonetheless, it would become a second home by French definition. It raises the question of what is the right thing to do, for the French expats as well as us. If we keep it we pay, if we sell it we pay, so what other resolution do those people abroad or we have? I imagine it will drive a lot of expats into permanent residence abroad, especially if they have ensured pensions that are better than they might expect here. We will have to be inspired if we must leave - or pay. I thoroughly agree with Gregor about the reasons and that it is not going to be fun, but the question remains for those who have to pay how it will be done? Can everybody afford it? That is part of the short-sightedness of Hollande's government at this stage in the game.
Please do not forget that the tax hike applies to French Nationals as well. Many french people have holiday homes in this area, and let them out when they are not using them.
I see Hollande getting flack for being socialist. Please remember what got us in 'ze sheet' in the first place. The situation where we all have to cut down in costs and pay more taxes was not created by the socialists, but the effect of capitalism run amock. Starting with the subprimes in the US all the way down to Barclays manipulating interest rates. Someone has to clean up the muck, and however it is done, it is not going to be fun for anyone.
Going to be murder for you to get sales.
So many people buy to rent...
WHAT will happen to the VERY BUSY restaurants who depend upon tourism AND THE owners of rental properties as some of them have a few pennies for a dinner....SOMETIMES....oh wow.
Thanks Finn. Uncertainty is the worst headache. I don't really want to let it out as we'd need to be over here ourselves - you can't really trust caretakers to look after it properly for you especially with a swimming pool. Green pools don't impress paying guests!!!!! I've seen too many problems over the years caused by absent owners to want to go down the same road.
My mum is almost 87 - she may live well into her 90s and even beyond but of course there's no way of telling so we have no idea if there will come a time when we can return permanently - and we have both just reached retirement age ourselves. I do love our little farm. We've placed it with a couple of immobiliers who are worse than useless (no idea how they manage to earn a living - that's one of the eternal mysteries of the universe) so we need to market it ourselves. If we're going to get clobbered for restoring the wreck it was 20 years ago it's not really worth it.
Just found this extremely useful site. Hi everyone.
The first question I have is will the 30 year rule still apply or is he planning on scrapping that as well?
Secondly, our problem with this tax hike is a bit different from most others I think (although there are bound to be other people who find themselves in similar circumstances) We're really stuck anyway with the slow property market. We didn't buy our fermette with the intention of selling it and over the last 20 years have spent a lot of work and money on renovating it ourselves - so no receipts from certified builders of course and do most people keep them for twenty plus years?
We intended to end our days in France and then my father died and my mother has dementia so there is no question of her staying in the UK alone so we had to return to the UK. We will therefore be viewed as rich Brits (which we're not) having a second "holiday" home and taxed accordingly. We could do with selling to provide my mum with the kind of accommodation I'd like to give her in her final years. If we're going to be taxed out of the market then we might as well wait for another 10 years so the French exchequer won't get anything and it won't get local "habitation" taxes either as the property is currently empty and we won't be letting it out as it's not worth paying the extra taxes involved.
I somehow doubt that Monsieur Hollande with his, I understand, three holiday homes will get the huge hike in tax income he's acticipating.
Just my two cents worth.
Thanks Finn - that clarifies things. But do you know anything about over 70's being exonerated (even if they sell before the 30 year duration)? I have a 73 year old friend who may sell her holiday home and we were talking about this only the other day - we could find out on line or by calling a notaire but if you or anyone else knows the answer, we would be grateful to hear!
As pragmatic and straight forward as ever Richard! Some may have bought planning to use it for holidays then retire to it when the time comes - a lot of Belgians have been doing that in the Lot/Aveyron for the past few years and then it certainly does make sense. If they can afford the taxes that is...! :-O
*I* lost over €100 000 when I sold my house 18 months ago - just about wiped me out! My partner - who was never domiciled in French, just an occasional visitor - had to pay €1 500 to some anonymous organisation for the provision of an attestation that she owed no taxes in France - there was no contact between the organisation and herself to validate this declaration so it was obviously just another scam.
What I fail to understand is the basis on which this proposed tax rise is made - after all, we who have come to live in France have invested quite huge sums in the economy - and for those of us who are now retired and receiving income direct from the UK (or anywhere else for that matter) - we contribute far more to the French economy already than the average national - and at zero cost to the French government.
I'd be very pleased to have a gain that could be taxed. Right now I'm looking at a €70k loss :-( I wonder if I could get a tax refund - jk.
In view of the very small proportion of houses bought by foreigners, I don't think this will directly influence the French property market. However, I agree that the net extra income form this measure might well be offset by the decrease in sales and stronger tendency not to declare rental income at all.
thanks for the precision Peter, I was looking at hte overall figure and comparing. I certainly agree that it won't do the already very slow housing market any favours (although it affects only a small minority) and he should be doing all he can to boost any activity possible. It's like sooooo many measures - just hot air at the moment - remember the cpe...!
Andrew, the rate of CGT for French & EU citizens is 19 %. French citizens have the pleasure of paying a Social Charge in addition. Ex-Pats don't have to pay this charge currently. I quite agree, that it is just bringing everyone into line, but like Finn, I am not sure that the way that this is being done will pass EU examination.
When elected, Hollande was talking about the need for growth, and one sure way of achieving this is by stimulating the housing market, rather than doing the reverse, which this course of action will achieve.
Concerning the increase in tax on rental income, this will only increase the incidences of people failing to declare all of this income, meaning that the government is at risk of receiving a reduced income rather than the tax gain that was anticipated. Seems to me like a knee-jerk reaction, rather than something properly thought through. A bit like Sarkozy's attempt last year to raise an additional tax on 2nd homes owned by ex-Pats.
Johnny, I did and as far as I can see it's just bringing the capital gains tax for foreign owners in line with that of French owners, and expats living here.
Sarah, yes ,as far as I'm aware the change/increase was earlier this year and the original 15 years to be exempt was raised to 30 with a sliding scale.
I may have got confused but I am sure that the proposed capital gains tax rise to 34ish% was announced last year - I interpreted for a client who was signing his acte finale and the notaire and estate agent were talking about this hike whilst I was running my client through the contract......the law had not come in as yet but the notaire had received some official doc and was expecting it to be put in place in Feb 2012. They also talked about people over 70 being exempt?
Unless I've missed something, the capital gains tax increase brings it into line with what the rest of us pay here in France anyway, which is only right!