For many non-residents with a property in France, the amendment of the French Finance Act 2011 reorganising the French Wealth Tax (ISF) voted on 6th July 2011 simply meant that a second Land Tax would not be enforced. To compensate this tax being dropped, the amendment includes another measure that may turn out to be a costly surprise.
In effect, as part of the reform of the ISF, the Parliament raised the duties on partition (droit de partage) from 1.1% to 2.5%. This will particularly affect the cost of divorce and inheritance procedures.
Droit de partage
In general, such partition duties are applied to operations aimed at ending an undivided ownership (indivision); this is the default mode for holding a property in France where property is acquired in common by at least two people. This mode therefore applies to most property owners in France.
Currently, a 1.1% tax on the value of the property is applied. Should this amendment be kept as it is and not be rejected by the Constitutional Council, on 1st January 2012, the tax will be increased to 2.5%.
Affected procedures
Partition duties apply when a property is transferred from one undivided co-owner to another. This is the case when a couple is separating and the property is transferred to make one spouse or partner the sole owner. The tax will also be applicable when an heir in a succession procedure is leaving the property to a co-heir (usually with compensation).
Act fast!
So the countdown has started and you may be starting a procedure that will be affected by this increase. You may therefore prefer to register the partition before 1st January 2012 to avoid a costly increase.
In that respect, if all parties agree to it and in particular if your notaire is slow, why not register a private agreement or statement of transfer of ownership to pay the current partition duties? Then, after 1st January 2012, you can regularise by a deed where only a fixed fee (currently €125) would be applied.
To give an idea of this increase, notaire fees (including the partition duties) for the transfer to a co-owner of the sole ownership of a property worth €100,000 should currently be about €3,101.95. This amount could be raised to about €4,501.93 on 1st January 2012. Is it worth waiting?