Tax changes in France to affect foreign homeowners.

France’s new government has announced tax raises, targeting wealthy households, worth 7.2 billion euros.  The new changes will be retroactive and will affect non-resident second home owners in France, as well as French expats who live abroad but still own a property here.

The major changes that will affect foreign homeowners and French expats are:

• Increase of capital gains tax from 19% to 34.5%. 
• Increase of Taxation on Rental income from 20% to 35.5%

The tax on rental income is retrospective and will be applied from the 1^st of January 2012 while the increase of capital gains tax will take effect from August 2012.

However, if you already live in France and pay your taxes here, nothing changes for you.  Meaning that if you already have rental income from a furnished property (for example, a gite) then you will not be affected by the increase in taxes. 

Also, if your French house is your main residence you will not be affected by the rise on capital gains tax; and remember that after 30 years of owning a house you are not due any capital gains tax neither. 

For more details about taxes in France including some useful Vocabulary you can read my article Tax in France on Hubpages. 

Taxes In France

 

We just finished 2010, finished paying for all my 2009 taxes (taxes are paid one year in arrears in France) and I have to start worrying about my 2010 tax form for this year.  This is because the French tax year runs for the calendar year (ie. from the 1^st January to the 31^st December).  Very soon I will be receiving my annual tax return form called declaration des revenues.  Notice that in France, even if you have no income to declare you are obliged to fill in a tax return form, the French tax authorities will then send you a statement saying that you have no tax to pay.  

Taxes are high in France and as you would expect in a country with millions of bureaucrats, the French tax system is complicated even for the French!  It doesn’t matter how much you inform yourself, just when you think you finally understand it and you know it all… paffff they change the rules or even worst hit you with a new tax.

Having said that taxes are high in France, you will be pleasantly surprised to know that Personal Income Tax (Impot sur le revenue) in France is below average for EU countries, especially for large families, as the amount of income tax paid is based on the number of dependant children.  But before you get too happy, I’ll bring you back to the crude reality… once you add social security contributions (regarded as a form of tax) and other taxes, French taxes are among the highest in the world!

Every individual is responsible for paying and declaring their own Income Tax in France.  Late payment of tax bills will add a surcharge of 10% penalty to your bill.  

Who pays tax in France?

Under the French tax code if you are a resident in France you have to pay taxes in France. You are considered a French resident if:

• You are living permanently in France.
• You spend over 183 days in France during a calendar year.
• Your business is based in France
• You work in France

Allowances

Your taxable income can be considerably reduced by an array of allowances such as social security payments, home improvements and others.

For more information on paying your taxes in France, the 2011 tax calendar and some useful vocabulary to understand the French tax system you can click here.