Changes to tax laws set to affect ownership of property in France

Proposed changes to the tax laws
in France are likely to have a knock-on effect on the period of time that
British investors hold onto property in the country.

Experts believe that the changes
are most likely to benefit those investors who are looking to buy and sell
property in France within five years.

Taper relief replaced by inflation calculation when calculating gains
on property in France

The new laws plan to scrap
‘taper’ relief on the sale of second homes.  Currently, the relief is 10 per cent per year of ownership
after a property has been owned for five years, meaning that there is no
taxable gain after the property is held for fifteen years.

Virginie Deflassieux, associate
director of French tax at PKF (Channel Islands) Ltd, said: “These changes will
affect anyone with property interests in France. It will no doubt be opposed in
some quarters, as it will come as a very unwelcome shock to property owners,
some of whom have deliberately retained ownership of their properties to take
advantage of the taper relief.”

The plans are most likely to
benefit people who buy property in France and sell it within five years. 

John Busby, director of French
Private Finance, says that under the proposals those people who hold onto their
French property for over five years will be liable for a greater charge.  This is because inflation will now be
taken into account, rather than reducing the capital gains bill by ten per cent
for every year of ownership after the first five.

According to Busby, the changes
are likely to lead to an increase in shorter term holding and renovation of
French property as there is now an approximate 10 per cent extra tax free
capital gain for those selling under the new regime.