If you’ve been following the headlines closely over the last week or so, you’ll have probably spotted the news that the tax regime on holiday homes in France is set to drastically change and rates are set to almost double. Those who will be hit hardest are the 200,000 holiday home owners from the UK who own properties all over France, but what are the changes and what do they signify?
The Numbers
The figures that will catch the headlines are the increase in both the tax on rental income – increased from 20% to 35.5% – and the rate of capital gains tax – increased from 19% to 34.5%. Though these definitely represent a large increase, what will have landlords really struggling is that the tax is set to be retrospective and tax will be due on profits earned from January 1st 2012. This could leave a lot of landlords short on cash.
The European Courts
The one possible saving grace for UK landlords is that the changes would still need to pass through an EU court of law. The introduction of disproportional capital gains rates could contravene the EU’s principles of freedom of capital and, thus, the laws might, in a sense, be illegal. This would force President Hollande’s government to backtrack on their proposals.
Proper preparation
The advice to landlords, however, must be to act and prepare as if these changes will be put into action and they should start to prepare for paying across the tax to the French government. It does, also, highlight the importance of overseas property insurance. Keeping on top of cash-flow is going to be the absolute key to survival for landlords letting in France for the time being.
Keep your eyes on the blog and the news feed for any developments, but for now make sure you are well prepared to fork out almost twice the tax bill you might have been expecting if you’re letting in France this year.
