Planned taxation of holiday homes in France has been dropped.

You may be aware of the proposed new tax on holiday homes in France? it has recently been headlining the french property press, well the good news is that this has been dropped by the French government.

It was always seemed to be a last minute idea in order to help make the numbers work on the back of a reduction in the wealth tax. The decision to drop the idea was taken late last week at a meeting between the Minister of Budget, François Baroin and the President Nicolas Sarkozy. The meeting was also attended by senators representing French nationals living abroad, who would have had to have paid the new tax in the future.

There are a number of expert commentators who considered that the new tax did not comply with EU regulations. There also appears to have been pressure from the UK, in the shape of David Lidington, the Minister of Europe, he protested to senior French politicians about the proposed tax.

Part of the statement from the Elysee Palace read, ‘y avait une très forte incompréhension des Français établis à l'étranger.’

According to the French government, more than 360,000 property owners would have been liable for the tax, of which around half would have been UK citizens.

So the reason for abandoning the tax? well this could be highly politically motivated, the government had not thought through the implications of this proposal for the thousands of supporters (and voters) living abroad, and the reasons behind them being exiled. The impact was likely to have been relatively mild for most people but the worry of a pending tax made for a lot of uncertainty. The government estimated total revenues from the tax at around 170 million a year.

As the new tax will not now go ahead the government will need to find a replacement source of funding the deficit. The belief is that it is likely to be an increase in capital gains tax on building land. 

Blog submitted by: Sharon at Cle France.