French Leaseback - English resident

[Lespearsons]

Does anyone have a French Leaseback Property and are a UK resident and taxpayer?

I wondered how it worked with TVA, tax foncieres and are there any other problems you encountered.

With thanks

Keith

[Daft Doctor]

Hi, yes, I am.  If its a new build off-plan, you normally have to be registered for TVA with the french authorities so that either you (or the developer if you are paying net of TVA to him) can claim back the TVA on the build.  Once the leaseback is up and running, you will be paid your commercial rent plus 5.5% TVA.  This TVA is paid over to the french authorities, but you can claim back TVA paid out on things such as Syndic charges, accountancy, furnishing costs (if the TVA wasn't reclaimed at source by the developer and deducted from the cost), etc.

I complete a french tax return as a non-resident, but to date have only accumulated losses as more is allowable against income tax in france while the build is in progress compared to the UK (where 'aquisition costs' are usually only allowed against capital gains tax when you sell).  Once the leaseback is in operation, you can offset any french losses (this is often the case if you have a french mortgage on the property)against your UK income tax, but if you make profits you will pay that tax in france but then offset it against your UK tax under the dual tax treaty.

It sounds complicated, but actually it isn't really too bad.  The biggest headache is that the french tax year is a sensible 1st January to 31st December, where of course the UK is different.  I have used an english speaking french accountant to handle things to date.  Her name is Angela Francoise of Bruno-Hebert Associes.  She is based in Caen, but it doesn't matter as we communicate only electronically.  No accountancy advice is cheap, but she does a good job, her fees are tax deductable and the TVA is reclaimable.

You are exempt from the national elements of Tax Fonciere for 2 years with a new build, otherwise you pay it from day 1.  Having said that, I have read that unless you own the property on 1st January, you will not be liable for any TF during the rest of that year (there is another thread running on TF at present in this section of the forum).  I must admit, I thought I would have got a much bigger reduction in these first 2 years, when it only seems to amount to approx 30%.  With leasebacks you don't pay Tax D'habitation, the holiday company leasing it from you pays that.  Hope that helps a bit. 

[Winston]

I have had one for a few years.  A French accountant should charge around 400 euros a year to do all the info you need for your tax return. You will pay taxe fonciere, and probably some syndicate charges (I pay around 60 euros a year).  I also pay VAT tax yearly of several hundred euros. 

But as a UK tax payer you will have to pay tax in the UK on your rental income, so although you don't really pay tax in France, you do pay it here.

And, bear in mind, they are not easy to sell on, and they don't increase much in value.  I wouldn't really recommend them!