March 16, 2007
French property now more attractive
French properties are now looking more and more ravissant, as the French would put it. Real estate in France has become even more attractive with recent changes in the way French Leaseback property is taxed on its sale. Recent changes in France have taken away the necessity to pay VAT on French Leaseback properties when they are sold. This makes this type of French property an attractive overseas property investment.
In 1976, the French government introduced the Leaseback System scheme to develop the tourism in different parts of France. The country’s government was concerned about the slow French housing market and a slow down in tourism in certain areas of France. These concerns were addressed with the leaseback property buying system. Leaseback developments were originally enforced in the less popular parts of France but the scheme has greatly expanded since then.
Before the new French property law, the payment of VAT on the new property which is currently 19.6%, was waived but, if the property was sold prior to completion of the 11-year term, the vendor was required to pay a portion of the value added tax back to the state. The investor is no longer obliged to repay any VAT when selling the property, even if it is resold within the first five years of ownership. However, the residence must be ‘classified’ with an official tourism star rating.
The French property market was brought into the fore by allegations of greed, corruption and advantageous property deals. Ségolène Royal, a candidate for the 2007 French Presidential Election, was accused of underestimating the value of her French Riviera holiday home to minimize her tax obligations.
Royal, a member of the National Assembly, and a prominent member of the Socialist Party, denied allegations, saying she has always been “transparent” over her property portfolio. She explained that tax authorities would have intervened if there were grounds for concern.
Posted on: France
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