U-turn on holiday home tax sparks relief

Sarkozy scraps extra tax on overseas owners of holiday properties in France

The French government is scrapping its proposed tax on holiday homes owned by non-residents. This about-turn will spark relief among thousands of British owners of properties in France.

The decision was announced following a meeting on Saturday 18 June between President Sarkozy and Minister of Budget Fran�ois Baroin.

Olivier Cadic, who represents the UK for the Council for French Abroad, and a vocal opponent of the tax since it was first proposed, said on his blog (www.oliviercadic.com) following the announcement “I am very happy with the decision, which will be a huge relief to non-residents with a second home in France.” He goes on to say: “I think 18th June was a particularly good choice of date for the tax to have its Waterloo!”

Indeed, on 18 June, the tax came up against high-level political opposition. Senator Jo�lle Garriaud-Maylam (UMP national secretary for French-British relations) and eight other senators representing French non-residents met the President at the �lys�e Palais and presented their opposition. Olivier Cadic points out in his blog that Alain Jupp�, the Minister of Foreign Affairs, also insisted that the proposed tax be abandoned.

Another key factor in President Sarkozy’s decision was that, with French expatriates being able to elect MPs to parliament for the first time from 2012, proceeding with such a decision could have seriously undermined him politically.

Even if the tax had gone ahead, there was still another huge stumbling block in the shape of EU law as it would have discriminated between residents and non-residents. And it would have also come up against problems in French law. As Olivier Cadic said to French Property News: “It is contrary to the notion of equality that is written in to the French constitution – namely that this tax would create a special group who would be taxed.”

The tax, which would have affected around 360,000 households (of which more than half are believed to be British) would have been levied annually and calculated as 20% of the property’s notional rental value (valeur locative cadastrale).

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Patrick Joseph, of my-french-house.com says: "The way I see it, it was going to affect far too many better- and well-off French non-residents, most of whom would be from Sarkozy's electorate, would have potentially put off investors coming to France. It could also have affected the tourism industry (France is the most popular country in the world among tourists, receiving about 75 million visitors a year and has the third largest income in the world from tourism).

"Furthermore, not only it is quite unlikely that the controversial tax reform would have been approved in Brussels, but I would also suspect the cost of putting in it place and managing it could have been higher than the return generated.

"In any case, this is wonderful news for owners of second homes in France and for would-be buyers."

Writing on his blog on 18 May when the proposed tax was first announced, Olivier Cadic applauded the role British homeowners have played in many parts France and highlighted what he saw as the unjust nature of the tax: “I’m also thinking of our British friends who have invested in France. Often they have restored neglected properties to their former glory, bringing some life and vitality back to deserted villages in the south-west or in Brittany. They’re hardly being rewarded for their efforts now.”