Hundreds of thousands of second home owners could be hit by the equivalent of another council tax on their properties under new government proposals.
Connexion readers are furious and OLIVER ROWLAND investigates what is planned and what it is likely to mean for them.
PLANS for a new tax on second homes in France which are owned by people living abroad will be hard to bear for those who bought previously unwanted or derelict properties and have spent thousands of euros in renovation and local taxes as well as within the local community.
The tax would be applicable to all nationalities, including French, and would apply if the property is kept for the owner’s use rather than rented out. Owners could face a tax of 20% of the cadastral rental value (VLC), a theoretical annual rent value used to calculate local taxes but which generally bears little relation to market realities.
To find out yours, contact the service du cadastre at the centre des impôts fonciers (tax office dealing with residential taxes) in your home’s area. Financial magazine Les Echos reported government sources saying the aim was to levy the equivalent of a second taxe foncière, one of the two main residential taxes along with taxe d’habitation, each of which costs an average of about €500 (varying by home value and local taxation rates).
However, most people would pay more – up to twice as much or more in some areas – because of the way taxe foncière is calculated and the different levels set by local authorities. The new tax would go to central government whereas the other residential taxes go to local authorities.
A Budget Ministry statement said: “Owning a second home which you are free to use allows you to benefit from local and national public services like the police, justice, and national infrastructure.” However while non-residents pay towards local services through residential taxes, they do not fully contribute to financing national services, the ministry said.
Budget Minister François Baroin wants to apply the tax from January 1, 2012, and says it would bring in €176 million a year. If, as an estimate, the average tax take is €600, about 300,000 people could be involved. The proposed tax is part of a finance bill being debated in parliament, which also deals with France’s controversial wealth tax reform.
Anyone who could show three years of tax-residency in France during the previous ten years before leaving the country would be able to claim a sixyear exoneration. French and foreigners line up to protest against plans. FRENCH people who live abroad are also shocked at the proposals. The chief representative of the Union des Français de l’Etranger (UFE), Hélène Charveriat, said members were “sure to protest”. “Many retain a French home, which they usually consider their main residence – though the government does not agree – so this will be very unpopular.”
While some would benefit from the exoneration others would not. “Just like British people or other nationalities, there are plenty who move from country to country several times. It is sure to cause people problems; it’s not easy to budget for a new tax.” Bergerac mayor Dominique Rousseau said: “This measure would be a serious attack on the local tourism economy of territories like Bergerac. “We are lucky to be able to count on a strong presence of our friends from over the Channel in Périgord and especially in Bergerac. We, and other councils, do all we can to encourage it, for example via our airport. “The economic effects are fundamental and represent more than €100 million a year.
The government is being unjust and incompetent: it wants to finance a reform aimed at helping the rich [ie. easing the wealth tax] by penalising territories in crisis, like ours, with a measure resembling anti-European protectionism.” British Association of the Var chairwoman Auriol Langen said: “This will mean a lot of very unhappy Brits. A tremendous lot keep holiday homes they don’t want to rent out. A lot spend up to six months of the year here, and they will definitely not be enamoured of another tax.”
Rising living costs were already causing people to sell up. “A few can’t afford to keep houses in two countries that are both empty around 50% of the year; the one they get rid of is the French one. Often they are getting older and they go back to Britain to be near their children.”
The president of estate agents’ group Fnaim in the Dordogne, Charles Gillooley of Immobilier Causses et Vézère, said the tax was “ridiculous” and not properly thought out. “It has every chance of being chucked out because it will either be unconstitutional or against EU legislation.” But, he added: “Selling would not be easy because the market is not working well and if you are really stuck for €600 or so you shouldn’t have a holiday home. It’s a luxury and people already pay more local taxes on holiday homes than main residences because there are no reductions and exonerations. With someone thinking of getting out it might tip the balance.” Boulogne-sur-Mer avocat Gerard Barron said whether the tax went through might depend on how it was drafted. “Any whiff of discrimination or of discouraging freedom of movement will be its doom.” It was true holiday home owners benefited from French infrastructure, he said, but they already contribute via TVA on purchases and ordinary holidaymakers also benefited.
A minority might look at selling and buying in Spain or Croatia instead but the tax would also be a brake on potential new buyers, already faced with local taxes, capital gains tax on resale, estate duty on death and “often unacceptable” inheritance rules. However, non-residents might find it hard to contest the plan as many of their MPs, especially in rural areas, would be members of the ruling UMP party who may not wish to champion the foreign homeowner, who is not a voter, over a measure which will cost nothing to their electorate.
Notaire François Trémosa, of the Groupe Monassier in Toulouse, said the law may pass because “the average citizen doesn’t care if they’re not concerned”.
British MEP Ashley Fox said in a letter to reader John Cox he considered the tax “punitive” and a “barrier to investment in France”. In terms of EU law however, the tax may not be deemed discriminatory because it can apply to French people, he said. On the other hand it might be found to impede free movement of capital. The EU commission is “closely scrutinising” it with regard to this, he said.