Controversial holiday home tax scrapped
21 June 2011
Almost as soon as it was mooted in parliament, the proposal to introduce a new tax on those with second homes in France has been scrapped.
The decision by President Nicolas Sarkozy was made over the weekend under pressure from both English speaking expatriates and French nationals living abroad.
Currently, non-French residents with second homes in France have to pay taxe habitation and taxe foncière and the threat of additional taxation provoked much anxiety from second home owners.
If approved by French MPs at the vote that was to take place in July, the proposed tax would have been calculated as 20% of the valeur locative cadastrale – an estimation of the property’s rental value.
The tax would have applied only to those who do not live in France all year round and choose not to rent out their French property.
Prior to the announcement made this weekend, estate agents Knight Frank issued a report that estimated a villa worth €700,000 would be charged around €280 per annum.
Graham Downie, a FrenchEntrée property finder based in Cognac considered that if the tax come did into force in January 2012, it would not affect business hugely and said so in his blog of 7 June:
“I think the tax will have minimal effect on demand or house prices. Council tax in the UK is far higher than the combined taxes (habitation and foncière) in France” he reasoned.
“The French housing market is one of the healthiest in Europe with increasing transaction numbers and gently rising prices” Graham added.
Since the tax was first suggested by Sarkozy in May, there has been speculation that his plans to fund national services in this way could prove unworkable under EU law.
Non-resident second home owners do not contribute to the French economy through income tax but it had been suggested that the new tax could be deemed discriminatory to foreigners.
But as recently as two weeks ago, the tax seemed to have the support of French MPs who approved the idea on 6 June this year. A final vote was scheduled to take place next month.
As part of his campaign to be re-elected as President of France next year, Sarkozy is keen to come up with policies that will appeal to voters and as of 2012 French expatriates will have their own MP.