France plans new property tax on foreign owners

12 May 2011

The French government is preparing to introduce a special tax on non-resident property owners – mostly foreigners.

The tax will be set at 20 per cent of a property’s nominal (cadastral) rental value.

It will affect some 360,000 properties, many of them owned as holiday homes by residents of Britain or the Netherlands, says news agency AFP. Foreign owners of second homes in France already pay local property tax – taxe fonciere (levied on owners) and taxe d’habitation (levied on occupiers). The new tax will effectively impose a second taxe fonciere.

The cabinet approved the new tax yesterday, and it will be debated in parliament in July. If enacted, it could come into effect next year, raising an extra Euro176 million a year to help cut the country’s enormous budget deficit, said budget minister Francois Baroin.

But it is likely to be challenged under European law, since in practice (if not in wording) it will discriminate against foreign owners of holiday homes. The French will defend it on the grounds that the law makes no mention of citizenship. But people who have been French tax-resident for at least three years out of the previous ten will be exempt for six years:  virtually all such people will be French citizens.





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