While U.S. lawmakers wrestle with the tax advantages of homeownership, their counterparts in France are doing something about it.
Effective in February, the rules will change with regard to how capital gains – "plus values" in France – are calculated with regard to secondary homes and “holiday houses.”
Currently, the capital gains tax is applicable in total for properties that are resold within five years. For every year after that, there is a 10% discount, until the 16th year, when all sales are tax free.
Starting in February, the tax is still applicable in its entirety during the first five years of ownership. But the discount will be 2% for each year of ownership between the sixth and 15th year, 4% between the 16th and 24th years, and 8% annually between the 25th and 30th years.
The capital gain tax rate also is being raised, from 31.3% to 32.5%, but only on residents of the mother country. Residents of other EU countries will continue to pay 19%, while residents of countries outside the EU (except Iceland and Norway) will continue to pay 31.3%. For residents in a tax haven with no tax treaty with France, the applicable capital gains tax rate remains 50%.
The French government has estimated an income of €€180 million in 2011 and €€2.2 billion in 2012 from the new capital gains tax.
Although Fredrik Lilloe of Estate Net France SAS, a luxury property agent on the French Riviera, doesn't expect to see a rush of sales to get in under the wire, he says "We have already seen evidence of reduced prices on properties owned by non-French residents wanting to sell before Christmas in order to avoid the extra tax-bill."
