Proposed additional 15.5% tax on holiday home rental and profit on sale

General Discussion
1

I know this is the Daily Mail but I am assuming they've got the facts straight.


"The increased levy on income from rented property and capital gains tax on sale profits could cost second-home owners thousands of pounds more a year....


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."


http://www.dailymail.co.uk/news/article-2168721/French-president-Francois-Hollande-unveils-wealth-tax-1m.html#ixzz1zh6LDlx7


BIG POSTSCRIPT:


I should have questioned the accuracy. The Daily Mail says 'liable for a 15.5% tax' - the Telegraph adds the 15.5% onto the existing tax. Big difference!


"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"."


http://www.dailymail.co.uk/news/article-2168721/French-president-Francois-Hollande-unveils-wealth-tax-1m.html


2

First of all we're talking plus-value, excess value in this case. The profit you make when selling a house, after deduction of some costs. Hollande wants to return to the situation that existed before 2004 where the calculated plus value is lessened for with 5% for year your owner of the property, counting as of year 3 of the purchase. So after 22 years you would have to pay no plus-value instead of 30 years as it is now.

Also the owner/seller would pay taxes of the plus-value according to his level of personal tax (tranche marginale d'imposition, at this moment 0,5.5, 14, 30 or 41% depending on your income).

The 15.5 % are the prélèvements sociaux applied to the final sum of taxes to be paid on your plus-value.

So a an extremely simplified example: you sell the house, that you bought in 2000 for 100.000 Euros with notary costs of 8000, for 150.000 euros in 2013. You fall into the 14% income tax bracket.

Taxable is 150,000 - 100,000 - 8,000 = 42,000

Reduction because of 13 years of ownership minus the first two years: 11 X 5% = 55% equals 23.100 euros

So taxable 42.000 - 23.100 = 18,900 which gives a total tax of 2646 euros

These will be subject to the 15.5% prélèvement sociaux: 2646 X 15.5% = 410,13 euros

Total taxes paid: 2646 + 410,13 = 3056.13 Euros. or 7.3% of plus value or 2.04% of selling price (but hey, I don't work for the Mail Online :-), neither am I a tax expert))

But then again, nothing has been decided yet.............

3

Cor, do you have a vid overlooking us? You described him perfectly. As for kharma, I suppose I do in a way, I most certainly believe in madmen.

4

Do you believe in Karma, Brian? Who is going to buy his fabulous new build? It won't be foreigners (including French living/working abroad) looking for second homes because the incentive to invest will have gone. His market will be reduced to French and foreign residents who will not pay the probably exorbitant price he will be looking for. He sounds like a pompous fool who will get his come uppance. And he thinks if he does manage to sell on, he'll get round being taxed on it? Good luck to him.

5

Later is nearly always too late.

6

Our 'neighbour' with the two ruins turned up a while ago today. My OH was passing through and had an almighty row with him. We have a strip of his land with a servitude. He wants to have a JCB remove all the trees from it and to hell with our servitude, vegetables growing and our privacy because he has got a CU to built on the plot. Therewith our privacy will be gone for one thing, the terrace that strip is one levelled down to conjoin the strips and then a house built that he intends to sell. He says that in the UK he has no regular job now but will easily get finance to build the house. I threw in this tax business in for good measure. He was with the son of an English guy who owns several houses in the next door wealthy commune. The son had no idea about this tax business. Both of them just dismissed it and said that taxes can always be avoided. That being the attitude and they will probably somehow get away with it no doubt, what is Hollande going to acheive? We will call the French neighbour converting a barn nearby and gather together the people of the two hamlets here and oppose the proposal. She warned him so but he said he does not care, he can get the money and will build no matter what and just like the taxes feels that the rules do not apply to him. So what is the point Mr Hollande because the dodgers and weavers will show you the middle finger as usual and that is about all you will get from them.

7

As in 'strike now, think later' - typical. Trouble is, by the time 'later' arrives any damage may already have been done

8

The last point is clearly not in their minds, but then attention to detail is a universal political flaw.

9

Yes I saw Finn's blog this morning (I posted this late last night so hadn't seen it obviously) and his questioning the legality of the new taxes. Think there will be a very heated political debate over this. I was wondering about the repercussions for people here who do have holiday homes and what effects it might have locally.

10

Facts right. Torygraph have run it too. Finn put out something early today and has written for the Torygraph blog. Not good news. The French expats are going to be especially furious because many are probably keeping places so that when (now if) they return home they have somewhere already. An own goal that they will pay for there. Foreign owners will dump second homes or, being outside French jurisdiction will ignore tax demands and just not use their houses, perhaps start renting them out or whatever tactic they can contrive. It all amounts to double taxation that should never happen within the EU and with other countries with bilateral agreements with France. Bad, bad news anyway.