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As we’ve mentioned before, there is a French expression “à quelle sauce serons nous mangés”. Literally, what sauce will be served when we are gobbled up by the government, the taxman or any other entity we disagree with. Unless there is a huge surprise next Sunday, whatever the dish it will be à la Sauce Hollandaise. President François Hollande is on the way to an overall majority in the French parliament and he’s going to be looking under every stone – and roof – for new revenues.

How is that likely to affect a foreigner buying an expensive property in France?

Quite rightly the French fisc has been waging war on tax-avoiding property owners for years. Originally the stated targets were French people exporting their capital to countries with more accommodating tax systems and then bringing some of it back, under the cover of Liechstenstein Anstalts, Swiss holding companies, Danish property companies and the like, to buy luxurious properties on the Côte d’Azur, in the Alps and other prime areas.

Little by little the taxman’s armaments have become more sophisticated and the meshes in his net smaller and smaller. Tax and financial advisors have also honed their skills and the avoidance structures have mirrored the evolving tax legislation in their efficiency and complexity. It seems unlikely that anything in the Sauce Hollandaise could not be satisfactorily diluted, entirely legally, by the right advisors – an efficient protective structure can always be found.

The only question will be, which is cheaper, the structure or the tax?

Collateral damage has of course also been suffered by many non-French who have been netted along with the rest. However, for non-residents it is easier to structure a purchase intelligently – as long as the steps are taken before any irrevocable contract to buy is signed.

What other tax dispositions should a foreign buyer consider?

Inheritance laws and taxation are very specific in France, but again a foreigner with the right advice can ensure these have minimal impact. Wealth tax rates will certainly increase under the new socialist government, but judicious financial planning (for example a mortgage with a charge on the property) can mitigate the problem. This, again, is probably easier for a non-resident to organize. The ownership period for total exemption from capital gains tax on non-principal homes was raised from 15 to 30 years by the previous government and it is unlikely this will be moved upwards – indeed there is talk of it being reduced to 20 or 22 years.

Will the Sauce Hollandaise make it unpalatable to own a home in France?

Not, we believe, if the buyer seeks advice. The key is going for the best advice and having the answers before committing to the purchase.

Bon appétit!

 

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