Author: Matthew Cameron

Date: 25 May 2011

The French Government has issued a draft law which will create a new tax on properties owned by non-residents in France. The law is causing controversy at the EU as it will inevitably discriminate against non-French homeowners.

The law is an amendment to the 2011 French Finance Act and will be voted on by the French Parliament in July. This legislation - which is likely to come into force in 2012 - will create a new tax on properties owned by non-residents in France. It will not apply to those who have made a permanent move to France or those who rent out their French properties. Presumably the reasoning of Sarkozy’s Government is that people who rent out their French properties are already paying income tax in France.

This announcement has given many British second homeowners cause for concern. However - although it is difficult to clarify at the moment - it is likely that the new tax will be a good deal less than the annual taxe foncière (a local tax applied to all French properties) that foreign owners already pay.

However, President Sarkozy may face challenges in getting the law passed, as it has been creating quite a stir at the EU. While not specifically identifying non-French people who own property in France, it will inevitably have a disproportionate impact on them. As such, the law appears to be in breach of European law and the European Commission is in the process of scrutinising it.

Any such challenge, however, is unlikely to come before the 2012 French presidential elections. Some have suggested – perhaps somewhat cynically – that the timing of this new legislation could not have been better planned. Along with the changes to property tax, the law contains a number of other matters, including amending wealth tax and abolishing restrictions that previously limited the upper end of the tax spectrum.

Wealth tax is a delicate subject in France, so these changes are seen as a pre-election sweetener aimed at appeasing the electorate. President Sarkozy has for some time stated that he would abolish the French wealth tax – a move which would not sit well with the Left in France. Rather than abolishing it, Sarkozy has reduced the impact of this tax. The draft legislation may, therefore, be a way of pleasing the public while going some way to satisfying a previous promise.

If you have any concerns in relation to how this may personally effect you, please contact: Matthew Cameron