The French Government’s plans to introduce higher taxation of foreign-owned homes could be challenged by the British Government. Treasury sources indicate that they are looking at the proposals to see if they breach European Union regulations. Meanwhile, opposition politicians in Paris are also warning that the move could be deemed unconstitutional by the European Court of Justice or other European institutions.
Some 200,000 Britons are thought to own second homes in France. Under plans recently announced by the new French President, Francois Hollande, tax on any rental income from the properties will rise from 20 per cent to 35.5 per cent, while Capital Gains Tax (CGT) will increase from 19 per cent to 34.5 per cent.
The rise in Income Tax will be back-dated to 1 January, while the CGT will take effect at the end of July, leaving little time for those who want to sell ahead of the increase to complete the transaction. The tax rises form part of a plan by the Socialist Government to reduce the nation’s financial deficit without impacting public services and jobs. The extra tax burden on foreign homeowners has been labelled a ‘social charge’.
Some French property experts have condemned the tax increases as potentially catastrophic for the French property market. They say that British owners, already put off by the weak pound, are likely to be further discouraged from making or maintaining any investment in French property. This could lead to a collapse in the value of all properties in areas such as the Dordogne, popular with British second-home buyers.