- Tuesday, 29 May 2012
Socialist François Hollande’s election as the new President of France could have an impact on Britons who own French homes or are planning to buy in the near future, says French property specialist Sarah Bogard.
If the pound remains strong against the euro, this could mark an era of strong buying power for the British in France. So will the new Government’s policy changes make it more desirable for property hunters to take the plunge?
Hollande’s manifesto included a number of proposed fiscal measures that could affect British investors, most notably changes to capital gains tax and inheritance tax.
“First we could see a jump back to old capital gains tax rules,” says Sarah, a partner with leading south east law firm http://www.furleypage.co.uk.
“In February, the period after which a property owner could be fully exempt from French capital gains tax on a sale was raised from 15 years’ ownership to 30 – this could be changed, possibly reverting back to old rules that would reduce the ownership period required for full exemption. Changes could happen soon, possibly as early as August or September. Sellers who are affected by capital gains tax will want to time their sale right.
“If the changes happen, estate agents expect such a move to give a boost to the property market,” adds Sarah.
Changes to inheritance tax could be less favourable for some owners. In 2007, Hollande’s predecessor, President Nicolas Sarkozy, introduced significant reforms to French inheritance tax, introducing a full exemption on transfers between spouses on death (transfers between civil partners on death were later recognised for the same exemption) and a threefold increase in the nil rate band allowance for children on inheriting from a parent, from €50,000 to €150,000.
Hollande’s proposals, however, suggest that while the spouse exemption would remain, the nil rate band allowance for children might be reduced again, possibly to €100,000. What’s more, the current 10-year accumulation period for lifetime gifts to a recipient (the donee), recently increased from six years, could be further increased to 15 years.
“These announcements have already triggered a surge of gifts from parents to children and grandchildren in order to take advantage of the current more generous nil rate band allowance,” says Sarah. “For many, steps could be taken to minimise the impact of French inheritance tax. This emphasises the importance of getting advice on your particular circumstances.”
Higher net worth British investors who have or are considering buying property in France could also be affected by possible changes to income tax and wealth tax but it is expected that they will not have as much impact.
“British owners of French property have French income tax responsibilities if they earn an income from that property by renting it,” says Sarah. “But any significant income tax changes are likely to be at the higher end so the impact on British owners not resident in France will be relatively low, and in most cases nil.
“Likewise, while wealth tax does affect non-French residents who own assets in France, the impact for British buyers is likely to be low. The threshold at which you become chargeable is currently €1.3 million, so any change here is more likely to affect those higher net worth people with high value estates in France.”
Over the coming months, all eyes will be on France – and indeed Europe – to see what impact the new President will have on France’s economy and tax system and also within the Eurozone.
France has been a sought-after country for property investment for a long time and it could be considered the country’s appeal will not be lost with a possible change in direction by the new Government.
“People who own assets in France will be concerned to see what changes might be made to French taxes in particular and how any changes will affect them personally,” adds Sarah. “We’re likely to get the first indication as soon as the new National Assembly has been elected in June, with further announcements to follow.”