Britons with homes in France to benefit from tax changes
Pensioners and second home owners will benefit from a reduced social charges rate for rental income, capital gains and investment income.
3 minutes to read
Last updated 18/09/2023
UK citizens with homes in France will pay a 7.5% social levy rather than the 17.2% social charge (prélèvements sociaux) when selling or renting their property.
European and French courts ruled that the 17.2% rate had been wrongly paid by British citizens since the UK left the European Union on 1 January 2021.
Instead, the ruling confirmed that social charges should not be paid by individuals if they are already contributing to another European country’s social security system.
Rentals
Since 1 January 2021, a holiday home generating a net rental income of €10,000 (£8,394*) per year, would previously have incurred a social charge of €1,720 (£1,444). However, the owner will now owe only €750 (£630).
Sales
The saving for a British citizen selling their second home or investment property in France will be greater still.
In the case of a property bought in 2012 for €250,000 (£209,848) and sold in 2022 for €350,000 (£293,787), the chargeable gain after an abatement for 10-years’ ownership is €91,750 (£77,014).
Charges at 17.2% = €15,781 (£13,246)
Charges at 7.5% = €6,881 (£5,776)
Saving on social charges: €8,900 (£7,471) (NB this does not include actual capital gains tax).
Rebate option
For British citizens that have sold a property in France since 1 January 2021, the French tax office has confirmed that they can now apply for a refund provided they meet the following conditions:
- They are registered with the British social security system
- They are nationals or legal residents of France, the United Kingdom, or another European Union member state
- They are not dependent on the French social security system
The deadline is the end of the second year after the one in which the tax was paid according to The Connexion France who originally asked the DGFiP national tax authorities to look into the issue of whether UK S1 holders in France (whose healthcare is paid for by the UK) may continue to benefit from the charges reduction.
According to Jack Harris, a Partner in Knight Frank’s International sales team:
“This recent change in the fiscal landscape reflects the French authority’s commitment to enable British citizens to confidently buy and sell homes across the country.”
Jack adds, “Indeed, it may well encourage some British owners to sell in a buoyant market given the high level of international demand we’re seeing in prime destinations such as the Cote d’Azur, Provence, and French Alps.”
It’s worth noting that the post-Brexit requirement to appoint a professional fiscal representative if you are selling a French property for over €150,000 that is not your principal home remains in place. This costs between 0.5% and 1% of the sale price.
Caroline Cohen, founder of the France Law Practice, specialising in cross-boarder tax issues, highlights the advantages for UK citizens:
“Capital gains tax paid in France is tax deductible in the UK. Indeed, a UK tax resident will also pay CGT in the UK on the gain he makes on the sale of his second home in France. However, there is no double taxation as under the France/UK tax treaty of 2008.”
The move suggests we are starting to see governments and courts yield some ground post-Brexit in an effort to attract investment, boost their economies and reduce their pandemic-induced deficits. The court ruling comes on the back of speculation that Spain plans to introduce a digital nomad visa which would allow British citizens to spend more than the 90 out of 180 days in the country.
For more information
For more information or to discuss any property requirement you have in France please contact Jack Harris.
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*Exchange rates as at 31 December 2021.
It is recommended that detailed and bespoke tax and legal advice is sought from independent tax advisers