New 'council tax' on second homes

OWNERS of French second homes who live abroad could be taxed the equivalent of a second council tax on their properties.

The new tax on second homes would apply to properties owned by people who are not French tax-resident and who keep them for their own use as opposed to renting them out.

It would be 20% of the cadastral rental value, a theoretical annual rent value used by tax officials, to calculate the local taxes of taxe foncière and taxe d'habitation.

According to financial newspaper Les Echos this equates roughly to a second taxe foncière for the properties.

Budget Minister François Baroin believes the tax will bring in €176 million a year by 2012, when it could come into force, from January 1.

The tax is part of a finance bill that was presented to the French cabinet yesterday, the first stage before a law is debated in parliament.

The bill also deals with matters like the reform of the wealth tax.

Mr Baroin justified the tax on the basis that people with holiday homes pay towards local services through their normal residential taxes, but do not contribute towards national services and infrastructure, even though they benefit from them while they are in France.

There would be a six-year exoneration for people who had been French tax residents and then moved abroad.

Anyone who could show three years of tax-residency in France during the previous decade before they left the country would benefit from it.

It is expected the bill – with or without the new tax – will be debated and passed by parliament this summer.

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