Moving the goalposts
Taxes - a tedious but unavoidable part of modern life - unless you’re Greek. And the French authorities, like most, have a passion for bucket loads of them. So far, so ‘tant pis’, it’s the same for everyone – deal with it.
Until, that is, it comes to the recent change in plus value (capital gains tax) on second homes for both French nationals and overseas owners. Ok, it has no bearing on your situation if the house is your main residence, but it’s effectively a retrospective, morally bankrupt and grubby political move that will result in unexpected bills for some sellers.
In short, it works like this – until August of this year, if you’d owned your second home for between 6 and 15 years, your CGT liability would reduce for each successive year and, after the 15th year, disappear completely. Almost overnight, the 15 year exoneration limit was changed to 30 years, with effectively bugger all reduction in CGT until you get some way beyond the 13th year of ownership, and you’re not tax free until the full 30 years are up. There was a proviso that if you sold your house by the end of January next year, the old rules would still apply. Big deal. It takes a minimum of 3 months to get to completion, so if you haven’t agreed a sale on your house by now, you’re in the new regime. End of.
Of course, you can still offset your original purchase price, Notaries fees and all artisans bills against the gain. But if you found your quaint cottage 15 years or so ago, you probably bought it for the price of an X-box and the plus value charge is going to be applied.
On the plus side, the CGT rate for UK and overseas owners is 19% (as compared with 32% for French residents), so you still hang on to over 80% of the gain. It’s also worth remembering that (in theory) you should declare the gain wherever you are tax resident. And if that’s the UK, there’s effectively no change to the amount that ends up in your pocket, given the ‘dual tax’ arrangement with France.
And it could be worse, as our Dutch clients are well aware – they have to pay an annual tax for the privilege of owning a second home.
Feel better now?