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Assetsure News 20th September 2007
French
Tax Reform and Holiday Home Investment
The French holiday home market is one of the most established and understood
investment destinations in Europe.
Overseas property investors have helped to
increase property prices, which have continuously risen with the increase in
cheaper and more frequent flights from more destinations across regional
French airports. Property prices rose by 15 per cent in 2007 with overall
rises in the last 4 to 5 years of 70%. Economists speculate whether these
fantastic returns can continue without help from the French Government...
The French population is not increasing and same rate as the UK and the
pressure on land is much less and the land area for new builds much greater.
Despite these demographic advantages, certain holiday hotspots such as Cote
d'Azur, Provence and the Dordogne a have simply been overwhelmed by British
people buying
french holiday homes abroad to the point
where people are doubting the prices will rise any higher. Indeed, some prices
have stagnated in some areas and even fallen. Local people have been squeezed
out of the market - particularly the younger generation. Voters have demanded
action and the newly elected, President of France, Nicolas Sarkozy has
listened and acted...
For the half a million British people who have estimated to have purchased a
home in France, the recent tax reforms introduced by the newly elected
president will prove a great relief. Part of his housing and employment reform
includes legislation which will benefit holiday home owners and British
experts now living in France, as well as French Property owners in general.
These measures include; firstly, scrapping death duties or what we commonly
known here in the UK has
inheritance tax (IHT). Duties will be
scrapped on the French Property for the vast majority of the population as
well as the introduction of a husband/ or wife exemption (for a similar to the
UK IHT exemption that has existed for many years).
The main reason that this is been introduced, (excluding the obvious political
advantages for the president) are that the taxes been perceived as being unfair
- upon the death of either husband or wife death duty is due on the property
despite the surviving member continuing to need the property to live. As
ordinary people have seen the value of their properties rise over time, so they
have become caught in to death duties tax thresholds, (similar to the way in
which a huge majority of working class and middle class people in the UK have
fallen now it's the inheritance tax brackets thresholds as their property has
risen in value). In addition, the IHT allowances gifts for the children of
deceased property owners, have increased by a factor of three to €150,000. In
effect the younger generation will not be taxed as much when they inherit their
parents property, regardless of whether they are French nationals or holiday
homeowners from the UK.
Secondly, the proposed legislation will also provide tax relief on 20% of the
mortgage interest in the first five years. This is aimed to stimulate continued
growth in the French Property market and economy in general. The growth it
is targeted at the younger generation who are finding it increasingly difficult
to get onto the property ladder as prices continue to rise similar to the
problem in the UK.
As well as benefiting overseas Property Investors and holiday homeowners, the
French government has ensured a expatriates wishing to benefit from the
excellent French Health Care System must renew their membership to ensure that
they are liable for free services. The French government is wishing to to ensure
a fairer taxation system exists to relieve pressure on French Health Care System
from people from within the EU moving into France. In addition Mr.Sarkozy wants
to provide future incentives to attract French nationals who are very wealthy
and have previously left the country have to escape historically high French
taxation, to return to France. This will have the effect of boosting the high
end property market.
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