Latest Laws for French Tax Residents.
Tax credit is available for the first five years of property ownership to French tax residents who paid interest on mortgages for primary French residences in 2007, whereby the compromise was signed after August 22, 2007. Credit is currently 20% of the loan amount and is limited to 750 pounds per year for a single, disabled person, also widows and divorcees, or 1500 pounds for married couples and PACS partners, wherein one of the partners is disabled. Those who have no tax liability receive a refund from French tax authorities.
The Finance Bill for 2008 will include debate over a governmental proposal for all French tax residents to receive double the credit and ceilings to 40% of the loan amount for the first year. For the first year, credit would increase to 1500 pounds for a single, disabled person; 3000 pounds for a couple; 100 pounds increase per dependent and 50 pounds increase per child who lives in alternate parental households. The bill would backdate credit to instances where the “acte authentique” was signed before May 6, 2007.
Those who are French tax residents or have other French sourced income, but who live in countries that have not signed a tax treaty with France are obligated to file tax returns and pay French personal income tax at three times the annual rental value of their properties. If an individual’s French income exceeds this amount, he must pay French income tax on all of his French income.
One cost effective way for those who own French property to offset high taxes is to rent their properties as furnished rentals (LMP), so that the loss generated by interest payments on loans offsets their income.
French tax residents pay a progressive rate of 5.5% to 40% on their net income. Non French residents are subject to the same progressive rate; however, their rates are a minimum 20% of their net income.
Wealth Tax for French tax residents. If, as of January 1, 2007, a French tax resident’s property was valued at more than 760,000 pounds, a wealth tax form must be filed with the tax center, and taxes will range from .55% to 1.8%. The wealth tax base takes into account market value of all worldwide assets, as well as all of the individual’s debts.
For non-French tax residents, the wealth tax base takes into account the market value of an individual’s French assets only and deducts only debts related to French assets from the calculation of the individual’s net wealth.
Upon the demise of a an owner with taxable property in France and depending upon their biological link to the deceased, surviving heirs can benefit substantially from certain allowances. These allowances are subject to an inheritance tax. A surviving spouse and children receive a general allowance of 50,000 pounds. An additional 76,000 pounds is applied to the surviving spouse’s taxable portion, and an additional 50,000 pounds is applied to a surviving child’s taxable portion. Heirs pay inheritance tax that ranges between 5% -40%, depending upon the net value of each portion. When the net value of the transfer exceeds 1,700,000 pounds, the higher fee or 40% fee is applied.
by V Bright Saigal, AboutFrenchProperty.com - Copyright © About French Property
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