The Socialist government plans to hike up taxes on non-resident homes in France

If all goes to plan, second-home owners will be hit with a 15.5 per cent tax increase, rising from 20 per cent to 35.5 per cent, to be enforced retrospectively from 1st January. There’ll also be an increase in capital gains tax on property sales from 19 per cent to 34.5 per cent, coming into force as soon as the end of July – leaving foreign property owners with little choice but to pay the hefty charges.

The extra costs have been classified as social charges (les prélèvements sociaux) and were previously only requested from French residents. It will be used to contribute to societal funds such as health care in France.

The second-home charges were part of a 2012 revision of the budget on 4th July – just days after France’s national auditor declared that the government has a potential deficit of 10 billion euros. The meeting confirmed that France would be imposing a total of 7.2 billion euros in new taxes this year as part of a plan to revive its weak economy.
The steep tax increases on non-resident properties are expected to generate 50 million euros of government funds in 2012, and 250 million euros in a full year.
Apart from the new enforced social charges, non-resident property owners already pay two different types of taxes in France. The first is an annual ownership property tax (le taxe foncière), paid by the owner regardless of whether the property is occupied by them or rented out. The second is a local residence tax (taxe d’habitation), imposed on the occupier of a property in which they were a resident on 1st January each year.

According to the UK’s Daily Telegraph, there are currently around 360,000 non-resident second home owners in France, and analysts are already warning of the impact the new law will have on France’s property market. Graeme Perry, a partner at Sykes Anderson which advises British citizens on French residences, told the Daily Telegraph: “If the law is introduced, the effective rate of French capital gains tax will almost double for EU residents.” He said the move may further damage France’s shaky property market, “particularly at the higher end.”
Former President Nicolas Sarkozy made similar tax proposals last year, approving an additional third tax akin to the Foncière and the Habitation, but decided to scrap the law via an amendment after a wave of opposition from angry foreigners and French living abroad.
UK media have already reported sources within the Treasury saying that they will challenge any proposal that breaches European single market laws and anti-discrimination rules.

Last month, British Prime Minister David Cameron stirred up tension after saying that he would be more than happy to “roll out the red carpet” for France’s prosperous high-earners, set to be hit by a 75 per cent tax under Hollande’s new regime.
Katie Williams