Details of how French tax hikes will affect hundreds of thousands of expats with holiday homes are becoming clearer.
Socialist President Francois Hollande Phase is levying a social contribution on all foreign owners of property in France.
This national insurance tax will add 15.5% to income tax on rental profits – raising the tax rate from 20% to 35.5%.
Capital gains tax changes – paid wholesale jerseys by owners who sell their French holiday homes – will also rise by 15.%% – from 19% to 34.5%.
In effect, the social contribution will not benefit the 200,000 Brits who ULYP/NABA/NSBE do not live in France but own a home there, and will become part of a tax squeeze on the wealthy aimed at plugging a €10 billion budget deficit.
One problem wealthy Brits with french property may face with the ‘contribution’ is that it may not be considered a tax.
Under double taxation treaties, UK taxpayers can claim a foreign tax credit relief to cancel out tax paid on income earned overseas, but the payment to a foreign government must be a recognised tax, not a social levy..
The proposed scheme Arizona leaves UK taxpayers with all sorts of financial problems.
Next, French CGT can depends not only on the profit, but tapers according to the length of time a property is owned. At this stage, it’s not clear whether the social levy will also attract Sellers taper relief.
If not, a UK higher rate taxpayer pay CGT at 28% will also have to pay a an additional 15.5% social levy – making the nominal rate of CGT 43.5%.
The way the social levy is legislated could make a mockery of double jeopardy tax paid on the same profits or gains – which is exactly what double taxation treaties were designed to avoid.