Ooo la la!
Do you own a property in France, or are you thinking of buying one? Either way you should consider the new taxes which will affect non-resident owners of French properties.
Social security charges (Contribution Sociale Généralisée, or CSG) of 15.5% have been added to income tax on rental income from 1 January 2012, and to capital gains tax charged on gains made from selling French properties from 18 August 2012. This has increased the effective tax rate on rents to 35.5%, and the tax on gains to 34.5% for UK residents – the rate varies according to the taxpayer’s home country.
HMRC has been asked to confirm that the CSG can be offset against UK income and capital gains taxes under the double tax agreement between the UK and France. On the assumption that the CSG is off-settable, a UK resident who pays income tax at 40% or 50% will pay the same total income tax on rent as before, but a basic-rate UK taxpayer will pay more in French tax than the 20% UK tax rate, and will be worse off.
The trouble lies with tax on gains made on French property, as the French maximum rate of 34.5% is now much higher than the UK rates of 18% and 28%. However, the French tax rate is reduced once a property has been held for three years, and is eliminated altogether once the property has been held for 30 years or more (this is to be cut to 22 years).
If you have property abroad, we can help you pay the right amount of tax on your income or gains.
