Plans to help the French budget deficit by increasing the tax paid by non-residents with a second home in France came into force at the end of August 2012 and will affect the 200,000 plus Britons owning properties in France. President Hollande is also looking to make more changes in the Finance Bill for 2013 which was published last month.
Withholding tax on rental income in France is set at 20% and although the Plus Value Taxe, which is the French equivalent of Capital Gains Tax, remains at 19% for non-residents, the social charge of 15.5% is being extended to both rental income and Capital Gains Tax making the tax rates for EU resident owners 35.5% on rental income and 34.5% for Capital Gains.
Previously, only French residents paid the social charge. However, this is seen as a widening of the net to non-residents. Although the social charge does provide for benefits, it is defined under the current UK/France double taxation treaty as a “tax” and not as a social security contribution and so would be available for offset against UK tax liabilities. New residents to France should ensure they are fully conversant with French tax law, and remember, it is not possible and not advisable to try to hide under the radar as a UK resident. The potential sale of any French property will be stalled by the notaire if no French tax reference number can be supplied.
If you own property in France, please contact us on 0845 177 5007, by email at [email protected], or by using the contact form on the website.