New French tax for non residents owning French holiday homes

Many people own a holiday home in France, but new tax laws could cost owners thousands.
Many people own a holiday home in France, but new tax laws could cost owners thousands. | Source

New French holiday home tax for non residents - May 2011

With Sarkozy's popularity falling, he seems to be looking around desperately for popular vote winning policies. One of his latest takes a swipe at non resident holiday home owners.

His plans are to levy a new tax on non French residents who own a second home in France. This tax will be 20% of what is known as the "Valeur Locative Cadastrale" (VLC) which is a throretical rental value for the property calculated by the local tax office. Similar to taxe de habitation, this value depends on the size of the property. There is information on www.cadastre.gouv.fr.

Some key points to note about this new tax;

- Non residents who have been a French residents for 3 years in the previous 10 years before you leave France, you will be exempt from this tax for 6 years.

- The plan is to bring this tax in on the 1st January 2012.

- This new tax will only apply to residences and will exclude commercial and agricultural property, as well as building sites.

- Property owners who rent their property out year round to a rental agency (so it isn't freely available for the owner to use) will be exempt from this tax. Because of this, leasebacks will also be exempt.

- This tax already exisits in France for French Residents, but it currently does not apply to residents of other EU countries, or residents of countries which already have a double tax treaty in place with France.

- There is still a chance that this tax may get challenged in the European courts because it may breach the EU law on the free movement of capital

As with most tax issues (especially those to do with France), this isn't particularly straightforward, so if you think that this tax affects you, you should get some independent tax advice.

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