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Stamp Duty in France to be Abolished?

The favourite to be the next President of France, François Fillon, is proposing significant property based tax reductions and liberalisation of the private housing sector.

The former Prime Minister of France, François Fillon, has been selected as the Republican Party candidate for the presidential elections in 2017.

In the manifesto he prepared for the primary elections he set out several substantial proposals for the housing sector.

The main objectives of the plan are to make the sector "fairer and more efficient", which is to be achieved by giving greater freedom and incentives to local authorities, developers and investors, and by a reduction in regulations and taxes.

To this end, one of the key proposals is the abolition of stamp duty (droits de mutation) on the sale of property.

Currently, stamp duty is at the rate of 5.80%, payable by the purchaser. The rate is slightly lower in a small number of departments of France.

It is a radical proposal, but not one that is not entirely off the wall, for it was recently a key recommendation of a senior government think-tank, who considered that it hindered labour mobility. For the same reason, it is one that is also regularly canvassed around Europe.

In order to deal with the budgetary implications, the measure would be introduced in a progressive manner, but the number of years over which it will take place is not stated in the manifesto.

The income from the tax is a significant one for local councils, who will no doubt seek full compensation from the government, so this is likely to be a major wrestling point between the two sides.

One of the other the main proposals is a reduction in the period for complete exemption from capital gains tax to 15 years. Currently, there is complete exemption from capital gains tax per se after 22 years, and from social charges after 30 years.

The proposal is somewhat ironic, for it was François Fillon, who in 2012, increased the exemption period from 15 years to 30 years, subsequently reduced to 22 years by President Hollande!

It is not clear whether the 15-year exemption will also apply to the social charges.

The proposal only concerns second homes, as the main home is exempt from the tax, and this would remain the case.

Other proposals for the private housing sector are:

Local Rates - Increase the taxes on vacant building land in those areas of housing shortage to encourage release of land for development.

Fiscal Stability – Changes to the taxation will be established for at least 5 years to provide stability and give confidence to investors.

Mortgages – Reduce the fees and taxes associated with taking out a mortgage and make greater use of insurance backed mortgages over a conventional charge on the property.

Wealth Tax – Abolish the wealth tax – l'impôt sur la fortune – to encourage greater investment in the housing sector.

Rent Controls – End the control of private sector rents, introduced by a change in the law in 2012.

Tenancy Agreements – Create greater fairness in legal relations between landlord and tenant, by reducing regulations and giving greater freedom to the parties to determine their own contractual arrangements.

Eviction Procedures – Speed up eviction procedures in the event of default by the tenant in their rental or other obligations.

A suivre.

Related Reading:

This article was featured in our Newsletter dated 06/12/2016

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