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New French Tax Laws Favour Housing Market

by Ulrika Lomas, Tax-News.com, Brussels

23 August 2007


New tax laws introduced in France yesterday under President Nicolas Sarkozy's ‘Work, Employment and Buying Power’ (WEB) legislation will revolutionize the French housing market, says property specialist Leggett Immobilier.

The new legislation (LOI 2007 – 1223 du 21 aout 2007, en faveur du travail, de l’emploi et du pouvoir d’achat), raises the Inheritance Tax threshold from 50,000€ to 150,000€ per parent for each child. For nephews and nieces the new threshold will only be 7,500€, while for brothers and sisters the threshold rises from 5,000€ to 15,000€. In addition, the WEB legislation introduces tax relief on mortgages free of all means testing for the first five years of a mortgage..

Trevor Leggett, Executive Director, comments, “Inheritance Tax, like so many outmoded ideas such as Wealth Tax, has long been a sticky subject in France. But now, with changes to the Inheritance Tax threshold, Nicolas Sarkozy is set to revolutionise the economy and boost investment in the housing market. It is estimated that with the new changes as many as 95% of the population of France will no longer pay any Inheritance Tax at all upon the death of their parents. These changes will be of interest to British homeowners in France as they will also benefit.”

“It appears that now you can also make annual donations that are free of inheritance tax. This is a massive improvement on the original time restriction of 10 year intervals and will help parents and grandparents provide regular allowances.”

Up to 30,000 euros can be given every year to a child, grandchild or great-grandchild or even, in their absence, a nephew or niece. The donor must be under 65 years on the day of the donation and the recipient must be aged over 18 years. However, as Trevor Leggett says, “Care will have to be taken to avoid the donation pushing the recipient into a higher tax bracket. The recipient will still have to pay the appropriate level of income tax on the donation.”

The new mortgage tax relief scheme will only apply to new mortgages taken out from now, but plans to cover existing loans are in the pipeline. On a principal residence, the allowance will be up to 20% of the interest for the first 5 years of loan repayment. This will have a ceiling of 3,750 euros for a single person and 7,500 euros for a couple, plus 500 euros for each dependant living at home. The ceiling is to be double this amount for handicapped people (7,500 euros for a single person and 15,000 euros for a couple, one of whom is handicapped). The new tax advantage continues to be available when the homeowner is forced to move home following a career change.

Trevor Leggett says: “The tax relief for mortgages also applies to New Build property – although the legislation states that you must be living in the property permanently on 31 December of the second year of building/ownership. So the best time to start a building project would be 30 December - which gives a full 2 years to build – and then take advantage of tax relief.”

Leggett Immobilier is the largest, fully registered and independent Anglophone French estate agency in France. Buyers interested in finding out more about buying in France should contact Leggett Immobilier on (UK) 08700 115151 or (France) 00 33 5 53 56 62 54; email info@frenchestateagents.com; website www.frenchestateagents.com.


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