The French National Assembly has just confirmed an increase in the capital gains and rental income taxes. Overseas owners will be required to pay the additional taxes for the current year as the law will be back dated. However, there is some good news as these taxes should not affect the majority of non-resident owners. France has many dual taxation treaties. In the case of the UK, the new rental income taxes are lower than those in the UK. Whilst, the new capital gains tax rates in France tapes to zero after 22 years.
The French government expects to receive extra income from the increase in property taxes. Now overseas owners will be subject to the same rate and will have to pay 35.5% of tax on rental income versus 15.5% under the previous regime and 34% of tax on property gains up from 19%. As indicated above, it will be back dated to January 1st. However, European Union residents will receive a deduction from French notaries directly upon house sale if they have owned a property for a certain period of time. The taper relief will be of 5% every year after the first two years of ownership. The new system is more advantageous as it allows owners not to pay Capital gain tax after 22 years only instead of after 30 years with the previous one.
The French government expects to receive extra income from the increase in property taxes. Now overseas owners will be subject to the same rate and will have to pay 35.5% of tax on rental income versus 15.5% under the previous regime and 34% of tax on property gains up from 19%. As indicated above, it will be back dated to January 1st. However, European Union residents will receive a deduction from French notaries directly upon house sale if they have owned a property for a certain period of time. The taper relief will be of 5% every year after the first two years of ownership. The new system is more advantageous as it allows owners not to pay Capital gain tax after 22 years only instead of after 30 years with the previous one.
It is also possible to opt for a furnished letting tax system to mitigate the tax you pay on rental incomes and to also receive a total exception of capital gains tax after 5 years if you have more than €23,000 in rental income. These systems called LMNP and LMP are very profitable as owners can benefit from an amortisation system that cancels tax liability on the rental income (See www.frenchprivatefinance.com for more info).
In addition, an exceptional contribution on French wealth tax for 2012 will be payable on January 1st. Household with total assets over 1.3 million euros will pay the difference between the former wealth tax rate and the new one settled by new President Francois Hollande. New rates have not been established yet. Nevertheless, only net assets are taken into account so it means that the current amount of your French mortgage is deducted from your gross assets.
As there is often a way to mitigate the tax you pay on your property investment, non-resident owners should use tax advisor services to optimize their annual taxes.
.jpg)
Posts
0 comments:
Post a Comment