Sunday, November 9, 2014

UK/France: British Owners of 2nd Homes in France to Pay Deeply for Prosperity

According to the UK-based The TelegraphBritish owners of second homes in coveted areas of France could see the Gallic equivalent of their council tax rise by 20% under measures due to be presented next week.

The new surcharge sparked an embarrassing government dispute as some ministers argued it broke President François Hollande's promise to call a halt to any new tax hikes.
The initiative, part of a supplementary budget for 2014, would affect owners of second homes French and foreign--in around 30 areas around France where housing is in short supply, known as zones tendues.
Affected districts in France include Paris and surrounding area, the Atlantic and Mediterranean coasts as well and towns in the south-west and the Alps where demand for housing is very high.
"Obviously these are areas where Brits will ordinarily have their second home. The result will be a 20% increase for Brits with holiday homes in these areas and this could be applied from this year forward," said Graeme Perry, a London-based French property expert with Sykes Anderson Perry.
Michel Sapin, the finance minister, on Tuesday confirmed French press reports that the surcharge was in the pipeline. The aim, he said was to "unblock housing" in areas where "demand far outweighs supply."
According to Les Echos, the financial daily, it could also bring in €150 million to local councils, who decide whether or not to apply the surcharge.
COMMENT: Broadly similar to the Council Tax, the "taxe habitation" is a charge applied to the occupier of a property--whether the owner or a tenant--based on a percentage of its rental value.
There will be certain exceptions for people who need the second home for professional reasons or those who own a property but are living in a retirement home.
The plan is expected to only apply to unoccupied homes, meaning owners who have rented their property will be exempt.
With this in mind, Perry said: "In order to avoid this charge, [Britons with second homes in the targeted zones] may want to consider renting out their property, either permanently to tenants or holiday homes for tourists."
The French government had already previously suggested introducing a so-called "weekend tax" on second homes, but abandoned the idea late 2012, instead raising charges on capital gains from the sale of second homes--to the fury of many Britons.
The new surcharge is supposed to free up property in areas--mainly cities--where housing is in scant supply.
Paris's town hall welcomed the move describing it as "fair and legitimate" given that up to a quarter of all housing in some districts were secondary.
"Nobody can accept that we have 80,000 second homes sometimes only occupied a week per year while Parisians suffer from a housing shortage," said Ian Brossat, deputy mayor in charge of housing.
However, LES ECHOS suggested that as the average taxe d'habitation in Paris was only around €464, an extra 20% of just €90 was unlikely to prompt owners to free up properties for rental.
The move was slammed by Jacques Polissard, president of the association of French mayors, who said it was a "totally unacceptable" government bid to "place the onus on local communities by cutting funds and authorizing them to tax more."
The planned hike also split the cabinet, with Francois Rebsamen, the labor minister, saying it broke a government promise to halt tax hikes. "When we say we're not going to raise taxes, we don't have more taxes," he said. Yet, Rebsamen added that he was not averse to making "rich foreign owners" in cities like Paris pay "another tax" on rental units.

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