Paris Second Home Tax May Hit Overseas Owners
News Posted On: 13 November 2014
If you own an apartment in Paris and it isn’t your main residence, you could be about to get hit with a whole new tax. French President Francois Hollande is planning to introduce a new levy on second homes in areas with hosing shortages, which he expects will raise about €150m annually – as well as winning votes in Paris and other crowded French metro areas, of course.
The new levy could be as much as 20% of the current housing tax, and it’s due to be imposed on as many as 30 metropolitan areas in France, including Paris. Owners of second homes will be required to pay the levy to local government.
President Hollande has several times pledged to introduce no new levies, but serious housing shortages in French metropolitan areas, especially Pairs, have combined with a recalcitrant national budget deficit expected to top 4.1% GDP by 2015 and economic growth so slow that it would be called a recession if we weren’t so close to the worst one since the war, have combined to make him think again.
More than 174,000 houses in Paris – about 16% of the total number of homes in the city – are second homes, and the number is rising – it’s crept up 3% in the last five years. In the upscale parts of Paris around the 6th, 7th and 8th arrondissements, near the Champs Elysees, the Latin Quarter and the Eiffel Tower, the number of second homes, often belonging to foreigners, is nearly 40%.
Francois Hollande’s administration has instituted a ‘millionaire’s tax,’ a 75% levy on incomes that top €1m, but that’s due to expire on January 1. Then, his government will need to find new means of filling its coffers, as well as of convincing his core left-wing voters that he’s on their side.
The government asserts that the new levy isn’t simply designed to wring money out of overseas homeowners. Rather, Jean-Marie Le Guen told reporters last week, ‘our analysis is not a fiscal one but a real estate one. There is an important problem with vacant homes and we need to find elements to regulate that.’
The government hopes to force owners to rent or sell their property by making it too expensive to simply hang onto it as an investment or use it only a few times a year.
The planned tax will be debated in the French parliament later this month, as part of the 2015 budget package. As well as pleasing left-wing voters, the tax gets the French government out of what would otherwise be an impasse: local governments need more money, but the State has promised to give them less, cutting €3.7bn off the sum allocated to local governments every year until 2017. Local governments are looking or ways to make up the shortfall including taxes on transactions and services: Mr. Hollande’s proposals should ease some of the tension between central and local governments.
It’s unlikely to do much for foreign owners who are increasingly likely to be the targets of legislative efforts by French government to extract money from them and curry favour with natives at the same time. If you’re an owner of a French property, or you’re thinking about becoming one, this is something to talk to your accountant about.
Written by Les Calvert of www.property-abroad.com - overseas property reporter
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