Our holiday home insurance customers will be interested to note the attempt by President Sarkozy to help raise more revenues by passing a new tax for people who own a holiday home in France. This applies to all foreigners with second homes that are not rented out on a long term basis whether owned personally or through a company/trust. It is being debated that this could be challenged by European Courts as it seemingly discriminates against foreign owners however the wording of the legislation includes all non-residents including French nationals, which was probably worded with discrimination concerns in mind. However French expats are exempt if they have paid tax in three of the last ten years, which probably accounts for the majority of them!
Essentially if the property is only used a few weeks of the year then the holiday home will qualify for an additional tax on the property of 20% of the estimated annual rental value. If a property is available for letting for the whole of the year with a local letting agent it will be exempt. The rental value on a property is not a new concept as this already appears on on council tax statements as it is already used for some tax calculations so owners can refer to this to understand how much they may be liable for.
Those who own property in the most exclusive locations will obviously have a much higher bill as the estimated annual rent will be much higher than other locations in quieter parts of France. This may be the tipping point for some holiday home owners in France who do not let the property, however will this just force them offer the property for rent rather then sell up and lose their sunny retreat. Any new tax is unwelcome so only time will tell how British people react.