New property tax drafted by French government

French holiday homeowners could have to pay new tax as part of sweeping tax reform proposals

The French government has drawn up a draft proposal on a new tax for overseas owners of second homes in France.

The proposed new annual tax would be levied on non-residents who own a holiday home in France that is freely available to them (i.e. it is not used as a holiday or long-term let), and would be calculated as a percentage of the property’s cadastral rental value (valeur locative cadastrale).

The French parliament is to vote on the reform in July, and it is anticipated to be passed in time to become law in 2012.

While there is an argument under European law that the new tax would discriminate against foreign owners of holiday homes, it is believed that the French parliament would respond with the fact that the new law does not refer to citizenship.

The new tax proposal is among a raft of proposals that will also see changes to wealth tax (where, for example, the threshold at which wealth tax becomes payable would increase in net value from €800,000 to €1,300,000), inheritance tax and exit tax.