French property owners should beware of wealth tax change, says bishop fleming
People who own property in France will no longer be able to avoid a potentially hefty tax bill by setting up a non- trading company, according to a UK tax expert.
The French wealth tax was introduced for the second time in 1989 and applies to foreigners living in the country as well as French residents. UK residents are liable to pay wealth tax if they have a French property worth more than €790,000.
“This tax used to affect the very wealthy but in recent years the threshold has not been raised in line with inflation,” says Pippa Clarke, international tax partner at accountancy firm Bishop Fleming.
“People may think that it is not usual to own assets worth over €790,000 and they may also believe themselves not to be a French resident, but they could be mistaken on both counts.
“First, in so far as French residents are concerned, wealth tax liability is calculated on a person’s worldwide assets and the key point is that inflation has effectively reduced the point at which the tax comes into effect. Secondly, there are other conditions that may be raised such as whether someone spends more than 183 days in France each year.”
Pippa Clarke said that, until recently, many British residents with properties in France found they were exempt from the wealth tax if they were owned through a non-trading company.
“The idea was that company shares were moveable assets, so therefore wealth tax could not be levied on assets situated in the UK and no longer in France.
“However the French authorities are now taking a different stance and are treating these types of share to be immoveable assets, so allowing the tax to be applied.
“This change in attitude could affect a sizeable number of people in the UK who own property in France.
These issues are delicate and they should be handled on a case-by-case basis, always ensuring proper professional advice is taken.
“In fact where possible, it is always easier to deal with such issues before the property is acquired.”