Jon-Bxl

Hi

I am in France and heard about the new tax laws 34.5%! They say its against Euro tax law to do this - but this is another example of a big country in the EU 'thumbing its nose' to the rules they helped write!

http://www.thisismoney.co.uk/money/m...#ixzz23is56fbK

Since 2012 you now have to own a home 30 years to be free from any Capital gains tax (CGT). It was 15 years before. This post is ONLY asking about the CGT - not the income on rental

Heres a cut'n'paste from the article:

Previously, you paid full capital gains tax for the first five years, after which taper relief took it down to zero by the end of the fifteenth year of owning the property.

Now, owners pay the full amount for the first five years and then get a deductible allowance stepping up two per cent a year to Year 17, then four per cent a year to Year 24, then eight per cent a year until Year 30, when they get a 100 per cent deduction.

I did a quick spreadsheet and yes it gets to 100% in year 30 by applying these numbers

I was wondering if there are still the allowances you had before. Meaning you could add to your original purchase price 7% for all the costs charges etc and a one off 15% 'Travaux' charge. Thus you could have a 'starting price' higher than the purchase price to then calculate your gain - and apply the taper over the years.

Is this still the case in 2012, please?

Whats also worrying is that this will open the door to other countries hard hit by the crisis (as the article says)... so a bad use / ignoring of of the euro law could well spread out...


Thanks in advance

Jon

Novocastrian

From the article you linked...

"That somewhat unsurprising decision from a man who rode to office on an old-fashioned left-wing ticket, means potentially bigger tax bills for les rosbifs and other non-French residents."

I'm sorry but "old fashioned left wing ticket" and "les rosbifs" leave me reluctant to take the author very seriously.

Was he perhaps apprenticed at the Daily Mail?

White Trash

This new rule doesn't just affect British or other non-French owners of second homes. It applies to French as well! If you are affluent enough to own two homes then you are well able to pay a tax on a profit made from this luxury, however unlikely that scenario is with property prices nosediving as they have recently.

Jon-Bxl

Thanks I understand this and this was explained in the article.... but I am still looking for someone who understands the new calculation of purchase price and any allowances one can add to recalculate the starting price and then any capital gain.

Whether you agree with the taxes or not - (you seem Ok with them, I don't like the way they are introduced) we still need to be able to calculate and estimate any payments in the new regime... in the event of a sale.

So if anybody knows this - please can you advise, this could affect many people.

Thanks
Jon

cjm

My reading is that it is aimed at non-doms, be they English, French, whoever. Yes, there is an argument that it is not lawful, but hey-ho; anyone volunteering to take on the French government and its highest authority, the Constitutional Council? CGT rises from 19% by a further 15.5% 'social charge'. In addition the social charge is now added to rental tax, which currently stands at 20%.

Jon-Bxl

Thanks everyone for your thoughts. Even though off topic.

I used that article (there were many others) as it had a paragraph that was interesting regarding the (mathematical) calculation for the CGT. I included it in my post. I also did a spreadsheet to check that after 30 years the taper would be zero. So it checked out. I also thought some of the other financial discussion was interesting. I wasn't looking at this with 'political/critical' eyes, but from a numbers viewpoint. And I am a 'numbers guy'

I guess the tax changes are so new that no-one really understands the rules fully regarding any up front additional allowances one can apply. I don't - hence my question.

When I find out the answer to my actual question, I posed in opening this thread - Ill update this.

Moving on a bit off topic.

My wife and I are French speakers with a dream of buying a small house in a beautiful part of France - and living many months yearly there. The actual time will depend on many things, personal reasons as well as understanding the financial aspects of residency etc. It would for various reasons be a second home, and part of a retirement plan. 15 years till no CGT was attractive - 30 is not - I doubt if we will be around! Long gone probably

I will have to do a lot more spreadsheeting to understand the financial aspects of this and other tax laws changes in France, which do seem prohibitive for encouraging new people to come in. One of my best friends has just turned down an opportunity in France after researching all the tax and financial implications of Hollande's policies. I'm not trying to make a political comment here, just pointing out how this may affect my plans - (and e.g my friends plans.) I also have to see this as a 'sign' that France is prepared to do what to wants, outside of EU guidance as well... chucking on over 15% for CGT and rental is not a tiny change!

There is an influx of French coming across the border to Belgium, where we live, and buying beautiful properties for the price of an apartment in Paris, only 1h25 away on the train to Bruxelles centre. Its been on the news a lot, since the government changed.

But I am a 'big boy now' I have experience of living abroad and will check out all aspects before deciding. The financials are a key part of any major decision like this, of course.

For the first time, we will also be open to looking at other countries so that we can make an informed and comparative decision. And learning that language as well might be fun!

Thanks
Jon

MikeJ

Have you thought about Greece?

Although, joking aside, friends have just returned from the Greek islands and they report very little effect from the financial crisis, except that prices are less cheap than formerly - more in line with other EU MSs

Jon-Bxl

Too afraid to even think about it. But then Warren Buffet says 'When people are greedy be fearful; when people are fearful be greedy'

That's why I will never be a billionaire! I remain fearful. There is a >50% chance (IMHO) that they will default - exit the Euro - so devaluation of the currency will mean any investment is smashed. Of course living/buying there will be much cheaper after, but the social environment of this may make it difficult to live there. But who knows. They also say that PIGS - Portugal, Italy, (Greece) and Spain, are all going the same way. But I am less fearful for PIS! Wont make a joke now!

We prefer a mainland continental European location not so far from an airport...... that we can drive to if needed for the long visits and also for that quick trip, jump on a cheap flight. France is still on the cards but the double whammy of 2012 makes it (sadly very much) less attractive.

Of course there is a wonderful place on the Spanish/Portuguese border where prices have already tanked, where you could make an investment which on the downside is low and there is maybe an upside! and 2 countries to enjoy to boot....

Ayamonte Spain - no huge tourism, natural parks everywhere - miles of golden sand (=no pollution) .... and on the border of Portugal .. meaning 2 countries. Mike PM me if you want to know more

But we would not use our French

Lets see how things pan out.

Jon

PS Still havent figured out the allowances - when I do I will post. We are not in a rush

cyrian

Can you change the status of a french home from secondary to principle residence? What is the qualifying period of residence before CGT is not charged on such a principle residence?
This is fairly easy to do in the UK - even the MPs learned to do this in the "house switching" scandal.

Jon-Bxl

I dnt know all the rules as everything has changed - but the only way I think to do it is to register as resident in France with your ex-2nd-ary residence as your new primary. This way you will have to do it all, i.e register with the town hall, get a mutuelle, ID card etc etc

However the time needed (under the new rules) before selling is something I dont know, I would suspect at minimum a full tax year....

Any ideas?

EuroTrash

There is no hard and fast rule but you would normally need to have filled in at least one tax return from that address. Several years tax returns are better because if the notaire has any doubts at the time of the sale (obviously a lot of people are tempted to try this one on so they look out for it), he has to refer it to the fisc for investigation. They can check the utility bills to establish whether you have been living full time at the property and also look at your lifestyle, where you work, where your kids go to school, what other properties you own, what address your car is registered to, etc, etc. If they decide it was not in fact your principal residence they can come after you and claim the CGT after the sale has gone through.

Jon-Bxl

Here is a great site with the latest information

http://www.french-property.com/guide...ains-tax/rate/

and one of the links explains allowances

http://www.french-property.com/guide...ax/deductions/

So the answers I asked for are now available. This is a great site with lots of other info in the links...

Hmm my 1000th post!

Jon

Donnarhi303

Thanks for that information - it is very useful especially as you have highlighted that no tax relief will be allowed for us DIYers