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France need not be taxing

23rd September 2008 | back to article listings BACK    print this article PRINT

The cultural differences between France and Britain are indeed obvious to many people. While, traditionally at least, the French choose to dine on strong cheeses and red wine, Britons are likely to be enjoying a fish supper and a pint of ale across the channel. Or perhaps a Sunday dinner would be more appropriate as we are, after all, affectionately known as le rosbifs by our continental neighbours. But the differences in culture do not stop at battered cod and frog's legs - investors must be wary of the rules over taxation and inheritance laws in France.

It may indeed be a shrewd move, as well as an enjoyable lifestyle change, to invest in idyllic chateaus in Normandy. According to Siddalls, the independent financial advisors for people moving to France, Spain and Australia, household costs are a third cheaper on this part of the continent and the cost of living, ever present in the minds of UK consumers today, could be reduced by around 30 per cent.

And, the firm noted, while property remains at about 50 per cent of the value of the equivalent in the UK, the value of bricks and mortar has held strongly in France. This is despite a slowdown in the housing market there.

But, while this may all sound very appealing, investors should complete the necessary research on the nation's property laws first before taking the plunge. International and UK tax advisory service Blevin Franks has warned overseas property investors considering purchasing in France to understand the capital gains tax and inheritance laws that govern the country.

"[People] need to be aware of the changing tax treaty and how that will now bring in UK capital gains tax on UK property gains, for example," Peter Horn, senior advisor at Blevins Franks, remarked. Wealth tax, or the Impot de Solidarite sur la Fortune, affects new residents of France on January 1st each year, as it is at this time that individuals are taxed on their worldwide assets according to their household wealth if it is more than €770,000 (£612,383).

And this is not the only law investors should watch out for, Mr Horn said, adding that inheritance laws are also "very important". "For many individuals - a married couple without children or with children from that marriage - the situation can be quite straightforward. But there are complications where there are children outside the marriage or where individuals are not married," he stated. In fact, inheritance tax can be as high as 60 per cent, according to French Property, Services and Information.

Thus, while it is easy to see the attraction of property investment in France, it is important that the hard work is put in first to avoid anything too taxing when a sale has already been agreed.

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