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French Taxation

New Tax on Holiday Homes in France?

Tuesday 04 November 2014

The French government are proposing to allow local councils in areas of housing shortage to increase the local rates payable on holiday homes.

According to a report in the authoritative French daily newspaper Les Echos, second homes in areas of housing shortage could face an increase of around 20% on their taxe d'habitation.

The measure being considered by the government could apply in around 28 urban agglomerations in France, known as zones tendues, where a  tax on vacant homes is already in force.

These areas are: Ajaccio, Annecy, Arles, Bastia, Bayonne, Beauvais, Bordeaux, Draguignan, Fréjus, Genève – Annemasse, Grenoble, La Rochelle, La Teste-de-Buch – Arcachon, Lille, Lyon, Marseille – Aix-en-Provence, Meaux, Menton – Monaco, Montpellier, Nantes, Nice, Paris, Saint-Nazaire, Sète, Strasbourg, Thonon-les-Bains, Toulon, and Toulouse.

Most international home owners with country properties in France will not therefore be affected, although holiday homes in some popular coastal resorts will face a tax hike.

The purpose of the measure is to persuade owners to let out their second home. However, as it is unlikely most owners would be able or willing to let out their homes other than for temporary holiday use it remains unclear how this would assist in reducing the housing shortage. The additional tax is unlikely to persuade owners to sell their properties.

Neither is it clear how the lines would be drawn for those who already let out their holiday home on a seasonal basis.

Moreover, in Paris, where there are around 174,000 second homes, the level of the local rates averages only €464 a year, so an increase of 20% is more likely to be an irritant than an impetus.

Those who hold a second home for business or professional reasons would be exempt, as would landlords who ordinarily let out a property.

At this stage the measure has yet to be formally announced by the government, and it will need parliamentary approval. A similar measure proposed in 2012 was eventually abandoned due to the opposition of a large number of parliamentarians. Indeed, one government minister has already publicly expressed opposition to the idea.

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