Brits selling French holiday homes or renting them out could save thousands of pounds in surcharges after the French government scrapped a post-Brexit rule.
The French tax authorities have announced that UK residents and British expats in France will no longer have to pay French social charges (prélèvements sociaux) at the full rate of 17.2% provided they are already affiliated to the UK social security system and are not dependent on the French system. This includes existing and future S1 holders, such as British pensioners whose healthcare is paid for by the UK state.
From now on, these people will be charged only the 7.5% ‘solidarity charge’ as was the case before the UK left the EU.
Cross-border tax experts say it’s “fantastic news” for Brits renting out a gîte or selling a second home in France, as social charges are levied on net rental income and capital gains.
For example, if your gîte generates a net rental income of €5,000 a year, then after 1 January 2021 the social charge would have been €5,000 x 17.2%, which is €860. However, you will now pay only €5,000 x 7.5%, which is €375.
If you have capital gains tax to pay on a French second home or investment property, the savings are likely to be even more dramatic.
Capital gains in France is abated over a period of 22 years and the social charges begin to diminish after five years of ownership, reducing to zero after 30 years. If, after the abatement, you are left with social charges still to pay on a gain of €100,000, you would now be charged €7,500 instead of €17,200.
To qualify, people must be citizens or legal residents of the UK, France or another EU member state and must not be dependent on the French social security system.
The French tax office has confirmed that Brits who have “wrongly” been charged the higher rate since it was introduced on 1 January 2021 can apply for a refund.
“This 9.7% reduction in social charges is obviously fantastic news for UK nationals with rental income and gains,” said Jason Porter, of Blevins Franks, which provides specialist financial advice to British expats in France. “The fact those who have already paid excess social charges in previous years are able to recover this is very much welcome.
“It has always been frustrating that social charges cannot be offset under the terms of the UK-France Double Tax Treaty, but at least the rate is now reduced to 7.5%.”
Fabienne Atkin, a solicitor in French legal services at Ashtons Legal, agreed. “This should offer some comfort for people selling their French holiday home,” she said. “There are some caveats, however. For example, it will be necessary to establish that the sellers are indeed affiliated to the UK National Insurance system, and that they are not obliged to contribute to the equivalent French system.”
Ms Atkin also pointed out that the post-Brexit requirement to appoint a professional fiscal representative if you are selling a French property for over €150,000 that is not your principal home remains in place. Commissioned through a notaire, this agent checks that the correct amount of capital gains tax and social charges is paid, and is a requirement for all non-residents from outside the EU.
“It is worth bearing in mind that their fees can range from around 0.5% to 1% of the sale price,” said Ms Atkin.