4 days ago
France rakes in record €2.4bn from second home tax
Second home owners in France paid a record €2.4bn (£2.08bn) in tax last year after hundreds of municipalities increased their premiums.
Property owners including 80,000 British nationals have been hit with steep extra charges as part of Emmanuel Macron's attempt to solve 'marked imbalances' between housing supply and demand.
Experts anticipate revenue to increase year-on-year as more communes look to target second home owners.
It comes after the UK Government introduced a tax raid on second home owners in April, allowing councils to hit owners with five-figure bills.
In France, owners of a sole residence are immune to housing tax. The burden instead falls on second home owners – including around 80,000 Brits – who all pay a standard residence tax (taxe d'habitation), which is calculated on how much rent the property might achieve on the open market.
On top of this, around one in 10 French communes have the power to impose an additional surcharge of between 5pc and 60pc. These are areas deemed to be under 'tense' housing pressures that are pricing out locals.
Of the 3,697 communes granted these surcharge powers, 1,461 have introduced the levy.
The number has grown five-fold since 2018, yet there is still scope for a significant boost in tax receipts should local authorities opt to increase their rates.
Ross Irvine, of expat insurance firm William Russell, said: 'It's likely this income will continue to grow, either through more municipalities opting in or raising rates up to the legal cap of 60pc.
'Recently proposed legislation could also extend surcharge eligibility beyond housing pressure zones, making further expansion possible.'
As it stands, 539 communes have implemented the full 60pc premium, while 58 have brought in the lowest 5pc rate. The average surcharge equates to 41pc – a far cry from the blunt 100pc charge imposed by English councils, and the maximum 300pc threshold granted to Welsh councils.
This side of the Channel, disgruntled owners have been exploiting legal workarounds to avoid paying the tax, such as listing their property for sale for 12 months or flipping their home into a holiday let.
Welsh councils have had the power to introduce premiums since 2017 while English authorities have only held the power since April.
More than 200 councils have implemented the tax, with many seizing the opportunity to generate further income.
By contrast, the French system targets areas with housing issues. Mr Irvine said the policy 'appears more streamlined and effective'.
He explained: 'The legal framework clearly limits surcharge eligibility to designated communes and imposes a straightforward percentage increase, reducing ambiguity and closing many avenues for avoidance.
'Although some owners may find ways to game the system, such as swapping which property they declare as their primary residence, the majority of this surcharge is now binding and predictable,
'It gives local authorities a reliable revenue tool and expats less wiggle room than in the UK.'
