Wednesday, 7 September 2011

Wednesday, 7 September 2011

2nd homes news

French Ministers have got their knickers in a twist again over changes to treatment of 2nd homes. Followers of the Blog may recall the climb-down earlier this year when a new proposed tax on 2nd homes was abolished before it even became law. Now it looks likely that recently proposed changes to capital gains tax (CGT) on 2nd homes will be watered down to appease members of the ruling UMP party. Now, it is likely no CGT will be paid on properties held for more than 30 years, an extension of the current 15 years and a considerable change from the proposals which saw no advantage to holding a property long term. It is also proposed that the calculation of CGT will change, the finer details are still being thrashed out, probably based upon inflation over the period of ownership and with an increase in social charges. Currently capital gains made by private individuals on the sale of a property that is not their primary residence are subject to a withholding tax of 19% for EU citizens, to which is added the social security contributions (for French residents). The capital gain is broadly the difference between the original purchase price and the sale price, less any qualifying expenses. However, a reduction of 10% per year beyond the 5th year is aplied to the gain calculated. Thus, sales made after the 15th year of holding the property are fully exempt from CGT. This has encouraged owners to keep their property for 15 years to benefit from a CGT exemption. Prime Minister Fillon recommended removing the 10% reduction per year to tax gains actually realised on property, after neutralisation of inflation. The capital gain would be calculated based on purchase price plus inflation observed since the acquisition date. It is likely that the new regime will apply to any sales contracts signed after 24th August 2011. Peter Elias http://www.allez-francais.com/
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