New Tax to Be Levied on French Second Homes

on Dec 10, 2012

**French Property Owners to Face Between 3% and 5% Capital Gains Tax Increase**

The Times reported on 8 December 2012 that amongst the amendments that the French government is poised to make to its third “corrective finance law for 2013” is a hike to the capital gains tax (CGT) — a move which affects Britons and other holiday homeowners in France who may see the value of their properties take a hit as a result.
Under the proposed levy, second-home owners in areas with large British communities, such as the Dordogne, who make a capital gain between €100,000 (£80 000) and €150,000 will pay tax at 22 per cent, up from the current 19 per cent, while the tax on a gain over €150,000 will be raised by 5 per cent to 24 per cent. There is also a proposal by the French National Assembly’s Budget Committee chairman, Christian Eckert, for a tax increase of 9 per cent on capital gains over €200,000 on second homes – an amendment which French ministers have not yet indicated whether they will back.

**New Council Tax on Second Homes Also on Its Way**
Along with the CGT increase, the French government has also announced that it plans to introduce a new council tax on second homes, which would be equivalent to 5 per cent of the rental value of the properties. And even though some ministers said that this proposal could be backtracked on the National Assembly’s Finance Committee chairman Gilles Carrez, accused them of making up fiscal policy “in the evening, on the corner of a table.” He said that the Government was trying to “keep under cover” because the parliamentary amendment introducing the tax rises mentions “under-occupied accommodation” rather than second homes.

“Ministers must be particularly ill at ease,” Mr Carrez said, adding that the CGT rise was a further burden on a second home market already teetering on the edge of collapse. According to him, this move is “disastrous for the property sector” and “is going to add to the slowdown in sales.”
**Real Estate Agents and Investors Wary**
!m[Real Estate Agents Claim Move is “Dire News for a Market Already in Difficulty”](/uploads/story/997/thumbs/pic1_inline.png)Following the recent announcement of a new tax levy, foreign buyers, in particular, are said to be increasingly wary of investing in French property. The president of large real estate agents’ group Fnaim, François Buet, told French newspaper Le Figaro it was likely that people would put off selling as homeowners were tired of being taken for “cash cows”. He was also quoted by The Times as saying: “These hurried measures are going to block the market. In a single year, we’ve had three changes to capital gains [tax].”

Chairman of the Orpi estate agent chain, Bernard Cadeau, also claimed that the rises were “dire news for a market already in difficulty”. He said that the number of second home sales in the Dordogne and in neighbouring departments had fallen by up to 40 per cent in a year.
**Further Move to Curb France’s Budget Deficit**
While critics of the move warn that the proposed surtax on holiday home sales will not only hit vendors in the pocket but threatens to undermine an already feeble French property market, the tax increase is expected to be justified by the fact that it will further balance out removing a tax on bodies managing HLMs (social housing) that was introduced by the last French government. The proposed surtax has also been announced as President Francois Hollande’s further effort to set the public deficit of the country at 3 per cent of GDP.