Hollande’s new measures that particularly hit expatriates
Well, the dust is slowly settling on the first few months of Mr Hollande’s Presidency and, no surprises, there have been several unpopular tax changes to try and make inroads into the economic crisis and France’s crippling National Debt.
TAX ON RENTAL PROFIT: actually introduced last year under Sarkozy (remember him?), but rarely applied by local tax offices across France, and where it was applied often overturned on appeal. Effectively, any expatriate with a second home in France generating rental income will now be subject to a flat-rate 20% income tax PLUS 15.5% prélèvements sociaux (nothing social about this; just tax by a different name!) on the profit.
CAPITAL GAINS TAX: under Sarkozy “tapering relief” was abolished, so now a secondary residence has to be owned for a full 30 years before Capital Gains Tax disappears. Hollande’s extra “punishment” to the wealthy foreigner with a holiday home in France is to add the wretched prélèvements sociaux to the Capital Gains Tax; so whatever rate you were at before (most typically for EU members at 19%) add on another 15.5%.
WEALTH TAX: Hollande’s new measures have overturned Sarkozy’s previous lax attitude to collecting this tax; now, anyone with over €1.3 million is taxed at 0.25% on EVERYTHING over and above €800,000 (for amounts over €3 million, it’s 0.5%)
INHERITANCE/GIFT TAX: previously the gifting allowance per child was €159,325 every 10 years; now the tax-free allowance is €100,000 every 15 years with no inflation-proofing.
VAT: proposed increases to basic VAT on goods and services will not be happening, except for those at the 5.5% rate, which passes to 7% (not good news if you’re doing renovation work on your home!)
Other changes are afoot, but these are the ones likely to affect the expatriate reader of this magazine most. “Will the last person out, please turn off the lights!” Anyone still staying in France?
GOOD NEWS: the above bad news may be tempered by a sliver of good news, along the lines of the great PPI mis-selling scandal in the UK. Every time anyone takes out a loan or mortgage they are “sold” life and disability insurance (and loss of earnings cover) to repay the loan if something happens to them. In an actuarial world, only a small portion of the premium is actually needed to cover the risk, ie, that the borrower dies or gets injured. So, the remainder of the premium is pure “profit”. A French consumer association (UFC Que Choisir) has tested the water and believes that French consumers have also been “ripped off” and are due for a refund of an average €2000 per case. The banks and insurance companies may voluntarily pay up, or may be forced to by legal action; it’s early days yet. Watch this space!
Ah well, it may help with all the lovely new taxes!