New tax on non resident home owners

[Pickles]

The relevant part of the detail issued by the Govt is as follows (full text available from:

http://www.budget.gouv.fr/presse/dossiers_de_presse/plfr2011.pdf)

"Afin de faire participer les personnes qui n’ont pas leur domicile fiscal en France et dont

les revenus de source française ne représentent qu’une petite partie de leurs revenus

totaux au financement des services publics nationaux dont elles bénéficient à raison de

la propriété d’une ou plusieurs résidences secondaires dont elles se réservent la libre

disposition, il est proposé de créer une taxe, perçue au profit de l’Etat.

La taxe, calculée au taux de 20 %, s’appliquerait sur la valeur locative cadastrale du ou

des logements concernés.

Toutefois, les redevables qui ont été fiscalement domiciliés en France de manière

continue pendant au moins trois ans au cours des dix années précédant celle du transfert

de leur domicile bénéficieraient d’une exonération temporaire de six ans.

Corrélativement, l’article 164 C du code général des impôts (CGI), qui prévoit que les

personnes qui n’ont pas leur domicile fiscal en France mais qui y détiennent un

logement sont assujetties à l’impôt sur le revenu sur une base forfaitaire, serait abrogé.

Cette taxe entrerait en vigueur à compter du 1er janvier 2012.

Son produit est estimé à 176 millions d’euros à compter de 2012."

This confirms that the tax level will be 20% of the valeur cadastrale. Hence similar to TF.

However, it contains a 6-year exemption period for those who have lived in France for at least 3 in the 10 years leading up to their move out of France.

It also specifies that the tax will only apply to those whose non-residents whose French income is small compared with their global income (presumably they will use the existing system whereby if you want the 20% base income tax reduced, you have to prove that your total income is of such a level that if wholly taxed in France, it would be at a lower margin of imposition)

It also implies that if you are non-resident and have French sources of revenue, you will be subject to the same marginal rates as French residents without the minimum 20% rate being applied from the first Euro of income.

Regards

Pickles

[idun]

Paul T, be careful about staying in France for long breaks before you get your state pension.

I was told by someone at the Dept of Health recently that three months could be counted as becoming non eligible for UK health care upon your return. It is, as you mentioned definitely 6 months for pensioners, but ofcourse you have to be in receipt of said pension.

[Simon-the-censored]

Good point idun, plus - if you come to France with the 'intention' of staying for more than (only) 3 months - you may be required to register with your local mairie as a resident and affiliate to the French health system. Can of worms!

Simon :-)

[PaulT]

[quote user="idun"]

Paul T, be careful about staying in France for long breaks before you get your state pension.

I was told by someone at the Dept of Health recently that three months could be counted as becoming non eligible for UK health care upon your return. It is, as you mentioned definitely 6 months for pensioners, but ofcourse you have to be in receipt of said pension.

[/quote]

Idun

Thanks for the tip but our intention is to stay a max of 2 months each time. I think I read somewhere about the UK regs that being out of the country for longer than that can cause problems.

However, it seems that the authorities do not catch all. I know one person who has a flat in the UK which is rented out, a house in France where she spends most of her time, uses a friends address as hers, visits a GP near her friends address, has treatment under the NHS AND also has a Mobility car!

Paul

[powerdesal]

[quote user="idun"]

Paul T, be careful about staying in France for long breaks before you get your state pension.

I was told by someone at the Dept of Health recently that three months could be counted as becoming non eligible for UK health care upon your return. It is, as you mentioned definitely 6 months for pensioners, but ofcourse you have to be in receipt of said pension.

[/quote]

An interesting point Idun, how long does a returning resident have be subsequently resident for before becoming eligible again for UK health care as a UK resident?

[Simon-the-censored]

powerdesal - just take a look at the NHS website:

http://www.dh.gov.uk/en/Healthcare/Entitlementsandcharges/OverseasVisitors/Browsable/DH_074386

Take a look at the section 'Living in both the UK and another country'....

Simon :-)

[cooperlola]

[quote user="just john "]

The reality of this that the French generally do not buy the properties that are progressively falling apart, far from it and certainly if young french couples cannot afford miniscule mortgageable pavilions, they will not be renovating old stock, these were the provenance of Maison secondaire owners whose funds were gleefully accepted by French to go off and build another Pavilion. Should this tax become reality surely there will be less incentive for this process and less funds generated by piles of stones.

[/quote]We are in sweeping generalisation territory here!  Five of the houses within a stone's throw of me (one a small chateau in about 100 hectares) belong to French couples (of varying ages from 30 to 50) who bought them run down and seem to spend most of the time doing them up.  Three are main residences, the other two are MSs.  It is not just the province of Brits to buy old properties - there aren't enough of us to go around (and certainly not in my commune!)

EDIT :JJ, I realise that comes over as if I'm having a dig at you and I'm sorry - I meant to say that I think this is a pretty general belief amongst Brits over here - that they are the only people who buy old properties.  It is not my finding in my part of the world at least.

[cooperlola]

[quote user="just john "]

[quote user="cooperlola"] What is so blindingly obvious about this move is that it's not about money at all - it's purely about votes and it's the fact that it's only aimed at non-French that proves it.

I'm all for taxation and the redistribution of wealth but let's not dress racism up as economic expediency, please. [/quote]

Taxation is essential to cover what's paid out of course, in many cases house owners pay more than their fair share in terms of what they receive, however lets not pretend that taxation creates the redistribution of wealth to the poorer either, ''divide between rich and poor is greater after 13 years of Labour rule than at any time since the Second World War, according to the Government’s own report into inequality'' and what is happening in Greece might demonstrate.

http://www.timesonline.co.uk/tol/news/politics/article7003694.ece

[/quote]Sorry - I'm getting at you again!  (No, not really!  I'm just catching up with this thread - it's grown since last night.[:)])  We are  talking Tony Blair's New Labour here.  Please do not confuse watered-down-tory vote catchers with proper socialists.   Thank you.[:)]

[powerdesal]

Not in this part of France either. If it was, the Brico sheds would have predominantly non French customers, at least for the major stuff.

I think the restoration / DIY ethos practiced by Brits has progressively become a French thing as well, maybe not quite to the same extent - yet, but the cost and availability of housing is something that affects everyone, as does the desire for property ownership rather than rental.

The Napoleonic code which has effectively led to a number of restorable properties being held back from the market place has caused not only a visual blight on the countryside but is not the best, economic and ecological route. (IMHO).

[cooperlola]

[quote user="powerdesal"] The Napoleonic code which has effectively led to a number of restorable properties being held back from the market place has caused not only a visual blight on the countryside but is not the best, economic and ecological route. (IMHO).[/quote]I so agree.  In the few years I've lived here I've watched several properties just plain fall down due to lack of use.  Happily, since the motorway from Paris and the coast was finished, there are more incomers who buy second homes and do them up, but they are mostly French.  Whilst I see the logic in taxing the rich to care for the poor, I do believe that governments don't consider the wider implications of these blanket taxes, nor their economic impact on those who may not be directly affected, simply because all that interests them is vote winning.

Now, I can't argue with that as a strategy because unless you're in government, you can't do very much except criticise those who are, and pick holes in their logic.  The left opposition can't argue with this because it appears to target the wealthy (like it or not, anybody with two homes, even tiny ones, is, ipso facto, better off than the average person in most countries on the planet) and the right can't argue with it because it only targets foreigners so must be OK.  Thus it's the perfect tax - nobody who matters (voters) will notice the effect that it will have on them, those who are directly affected have no political voice, and the opposition can't argue with it because that would fly in the face of what they believe in.  Blimey, it almost makes me wish that I'd thought of it.[:)]

[idun]

PaulT, lots of the health people are becoming more aware in the UK and these things are picked up in conversations and chatting.

From what I was told it was like 3 months a year. Ie I reckon counting the days, like the 90 day tax rule.

 

I know it is all to pot really, but who needs to be told that if they take ill in a place that they consider to be home that they have lost their entitlement to free care?

I daresay that there'll be a 'case' and the law will become clearer, but it was just a warning.

 

 

Now for anyone else, new day now after all [;-)] They have had huge brico stores in France for a long long time. I always supposed that because the government make artisans so expensive to use that people need to be able to do jobs themselves.We used to laugh about what we had encountered as in our first appt, poor people  I suppose, everything seemed to get done with a hammer and nail, then we rented a little more upmarket and you'd hear the odd electric drill.

So french people do and always have done lots of bricolage. Some, including friends of ours like doing places up. Others like building from scratch and others buy new. AND a lot rent and still do the bricolage, moving into a place  possibly sans cuisine, putting one in  and taking it with them when they go, for example.

 

I also think like many young people, as when I was young, rather like the idea of starting together in a new place. Donc, I see friends kids who can, buying or building new homes.

The second home thing is really particular and that which was posted in french looks sort of how I expected it to look. I have to say that I am slightly amused at how the feeling seems to be that the french economy is being kept afloat by second home owners. And yet, when I think about it, some of you may well be doing that on a local level, but it is going to take me sometime to think of the advantages and disadvantages to any area when there are second home owners. I would hate to organise the public purse in such areas as I would still have to ie have the bin men calling round twice a week or so, without knowing if they would be making collections and there will be a lot more to it all than 'just the bins'.

[just john]

[quote user="cooperlola"]  We are in sweeping generalisation territory here!  It is not just the province of Brits to buy old properties - there aren't enough of us to go around (and certainly not in my commune!)

EDIT :JJ, I realise that comes over as if I'm having a dig at you and I'm sorry - I meant to say that I think this is a pretty general belief amongst Brits over here - that they are the only people who buy old properties.  It is not my finding in my part of the world at least. [/quote]

I wish I still had my helmet on, but in true DV fashion I have handed it on to my son (the grandchildren didn't know what it was all about), no need to apologise[8-|]

As regards your comments, possibly in your area, but not as far as I can see in mine, lots of expats, UK & Dutch mainly, (latest being the Innocent smoothies Chateau) including French new built to order for Brits and a preponderance still of 'English spoken' signs on agents;

[quote user="cooperlola"] Please do not confuse watered-down-tory vote catchers with proper socialists. Thank you.[:)][/quote]

Whichever Labour, Wilson's, through to Gorgon, spending more than is available is not good for socialism just arrogant recklessness, the best socialists were Capitalists who made money before using it to common good like Richard Owen through to Cadburys etc;
To get back to these latest tax moves, Governments (French particularly) rarely achieve reducing the rich/poor divide, and this proposed tax IMHO is not likely to play a part in that.

 If only the French would do something to help new start-up enterprise with less bureaucracy.

[cooperlola]

Idun, when we got married, we couldn't get a mortgage on a crumbling ruin - only modern stuff with a positive survey was acceptable to get the cash we needed.  The "choice" was made for us.

[mint]

[quote user="bixy"]It is not only non-resident home owners who are going to be upset by this new law, should it come about. There are a large number of people who live in France, thus being fiscally resident, who have never filed a tax return. They usually have an accommodation address in the UK - a friend's or relative's - which they use to handle their affairs, receive pensions, benefits etc. I personally know five couples. As far as the French authorities are concerned then, they are second home owners, and will get an unpleasant surprise when the tax demand arrives. I will not be shedding any tears for them since in my view they are cheats.


[/quote]

I can understand and totally agree with your sentiments.

I, too, knew quite a few couples who did that, one of which were our immediate neighbours.  However, these people are now all back in the UK.

As soon as the £ weakened against the euro, they sold their houses, making a sterling profit, and scarpered before the health rule changes could bite and certainly before the impots could sniff them out.

Not only that, of course none of them paid CGT as their French houses were supposed to be their principal residences.[:'(]

[powerdesal]

Idun,

I really dont think anyone went as far as saying that the French economy is being kept afloat by second home owners. Even my (over the top) calculations were qualified by saying the amount was a drop in the ocean for a national govt.

There is no doubt though, and I read it that you are in agreement, that there is a positive effect in some local areas, probably of course in the more popular second home areas.

I really dont get why organising the local area public purse should be made more difficult by the presence of second homes. To take your example of the 'bins' and my own area. We have a bin collection once per week, its a relatively new thing as in the past there were no bin collections. The green wheelie bin is put at the side of the road, the truck stops, bin is emptied, truck moves on. If the wheelie bin is not there the truck does not stop - simple really.

In our own case, when we are here there is a bin, when we are not there isn't, either way we pay the annual charge whether we use the facility or not. Our presence, or lack of it does not alter the income.

You could say the same for EDF standing charge, France telecom charges, Tax d'hab, tax fonc. They are all paid irrespective of our presence.

The same situation is probably repeated hundreds if not thousands of times across France.

It is stated that second home owners make use of the infrastructure but do not contribute to it - we pay the same ''road tax'' as any French driver, and use the same roads, but for less time, therefore inflict less wear and tear.

The road side hedges will still need cutting even if we cease to exist. The pompiers are still required, there are no more of because of second home owners. We are not a charge on the state health service.

What part of the infrastructure are we required to make additional contributions to because of our use?

Having said all that, we all know its a vote catching ''bash foreigners'' situation, its discriminatory, its contrary to the spirit of a united Europe and its possibly against some EU ''Law'' but it will happen none the less.

[cooperlola]

Beautifully put, Steve.  My problem is with the way the argument is worded - why not just say: "We're charging people who have more than one house because obviously they can afford to pay and as they're foreigners we don't really mind (in fact we'd prefer it) if they don't like it and go back where they came from"? 

[NickP]

Don't second home owners in France already pay slightly higher local taxes than principle home dwellers?

[Pickles]

[quote user="NickP"]Don't second home owners in France already pay slightly higher local taxes than principle home dwellers?[/quote]

Yes. About 2.5%. But also, IIRC, many people pay rather reduced local taxes on their principal residence due to various tax breaks for having dependent children, low income etc.

Regards

Pickles

[idun]

Did any of you know that there are already extra taxes for some with secondary residences in France. Below can be found on the non residents web site. I wonder how the new regs will affect these people, they may be better off, or perhaps not.

 

CASE NO. 2:

YOUR “RESIDENCE FOR TAX PURPOSES” IS OUTSIDE OF FRANCE, BUT YOU HAVE

ONE OR MORE RESIDENTIAL PROPERTIES IN FRANCE

You are liable to income tax on a flat-rate basis of assessment equal to three times the rental

value of these properties. The purpose of this measure is to establish a minimum contribution

that applies even in the absence of income arising in France.

However, there are exceptions to this rule. The following are not concerned:

• Persons who receive income arising in France whose amount is greater than the flat-rate

basis of assessment;

• Persons residing for tax purposes in a country or territory that has concluded a tax treaty

with France to avoid double taxation;

• Persons of French nationality when they provide evidence of being liable, in the country or

territory in which they reside for tax purposes, to a personal tax on all their income equal to

at least two-thirds of the tax they would have to pay in France on the same bases of

assessment;

• The nationals of countries that have signed a tax treaty with France.

Likewise, this measure does not apply the year of transfer of residence for tax purposes

outside France and the following two years to taxpayers of French nationality who provide

evidence that this transfer is due to professional imperatives and that their residence for tax

purposes was located in France on a continuous basis for the four years preceding the year

of the transfer. This exemption is also applicable to the nationals of countries that have

signed a tax treaty with France.

Enclose an appended note with your 2042 income tax return form detailing the address of

these properties and their actual rental value.

 

 

This probably wouldn't affect us if we bought a pied a terre in France as there is the 10 year rule, which is actually quite generous. Children wanting french nationality have a five year rule.

I remember telling a good french friend that we were paying twice the amount of french tax now that we are in England than we were when we were in France and our SS payments had gone up a lot too. She thought it quite fair, there is a feeling of national solidarity in France. 'Collective behaviour'? It is there alive and kicking in many guises.

[powerdesal]

Maybe someone can correct me but does the UK not have a double taxation agreement with France ? Or alternatively The UK has signed a tax agreement with France.

Surprisingly enough, the UAE has a double taxation agreement with France although the present income tax rate in UAE is 0 %

edit: see http://www.hmrc.gov.uk/international/france2.htm

[idun]

Yes, the UK it has a double taxation agreement, but not all countries do.  

[PaulT]

Another article here:

http://www.channelnewsasia.com/stories/afp_world_business/print/1128259/1/.html

[mint]

Nice, clear, concise article, Paul.  Thank you.

[woolybanana]

What we don't know yet is whether this proposal would have an influence on the buying or selling decisions of either anyone who is considering a purchase or anyone who is considereing a sale.

[Catalpa]

[quote user="powerdesal"]I really dont think anyone went as far as saying that the French economy is being kept afloat by second home owners. [/quote]

Well, I'm sure that's what they're saying on AngloInfo. Do you mean it's not true?! [8-)]

[:-))]