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Holiday homes face extra tax

Capital gains on non-residents’ second homes could be hit with 15.5% social charges (as opposed to none currently)

OWNERS OF French holiday homes could be made to pay social charges on capital gains when they sell them.

Le Figaro, which claims to have inside information, says the Corrective Finance Law to be presented today and debated in parliament from July 16, will include a measure levying social charges on non-residents’ property capital gains. These were recently raised from 13.5 to 15.5%.

At present these gains are exonerated from the charges but not CGT tax itself – most residents of non-EU countries pay a flat tax of 33.33% while EU residents pay standard GCT at 19%. Capital gains tax is not levied on main residences and is subject to gradual lowering on non-principal residences, with exoneration after 30 years (extended by the previous government from 15).

Non-residents’ second homes also came under attack last year when it was suggested they should face a new extra tax, equivalent to a second taxe foncière - a scheme which was subsequently dropped.

As reported in this month’s Connexion a raft of other tax measures are also on the way in the law, such as slashing the inheritance and gift tax allowance for children from €159,000 to €100,000, increasing the period after which the gift tax allowance is renewed from 10 to 15 years, and creating a new 3% tax on shareholder dividends.

The government is also expected to announce a one-off tax for wealth tax payers, equivalent to the difference between the tax payable under this year’s rules and last year’s (to which it plans to return next year).

The Prime Minister, Jean-Marc Ayrault, has said the bill will represent “tax justice”, with the most well-off and larger companies contributing more than poorer people or small firms.

The news comes as Ayrault made a speech in parliament yesterday about his objectives, confirming a goal of a balanced budget by 2017 and an overall reduction of the public deficit (the difference between state income and spending) to 4.5% of GDP this year as opposed to 5.2% last year. He also lowered the growth forecast to 0.3% for this year and 1.2% for 2013 (as opposed to 0.4% and 1.7%).

He said VAT on books and live shows would drop back to 5.5% (from 7%) and confirmed there would be no rise in the standard 19.6% VAT rate as had been planned by the Sarkozy government.

Among other plans he said there would be an environmental conference at the rentrée and another aimed at solutions to extreme poverty.

Photo: Manuel

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