Smart Money

12.10.17

When investing in property overseas the tax alone can substantially affect how much you pay. But now the French Government has taken action to help. Stephen Penn finds out more

One of the most visited countries in the world could benefit from an economy boost thanks to a new tax rebate structure.

Tourism is a major part of the economy in France and ensuring suitable accommodation is available is of high priority to the French Government.

Now, with a greater demand for more up-market self-catering accommodation to meet the demand inspired by companies like AirBNB, the French Government is offering tax incentives to attract investors. The new Para-Hotelier structure in France offers a 20% tax rebate off the purchase price of new build property.

Investors will also not have a pay a penny of French Income Tax on the rental income for up 30 years, meaning the nation is set to see a boom in high end properties for tourists.

But there are caveats to qualify.

Owners must provide breakfast - which can range from continental to a chef-prepared meal – as well as a concierge and a cleaning service.

And while these will cost owners extra on a day to day basis, the savings that will be made on larger, luxury homes will be generous.

 

Dylan Mitchell, the founder of Worldwide Property Company, has issued advice for people looking to take advantage of this tax incentive.

He explains: “These tax incentives apply to any new build residential property. So any new villa on the Riviera, any new chalet in the Alps and any new apartment in Paris.

“If you’re buying an apartment there is no requirement on any of the other owners in the block to also rent their properties, this tax incentive is based entirely on individual homes and does not apply to hotels or large resorts.”

From looking at the numbers, properties starting at €400,000 are the ‘break even’ point, above which Para-Hotelier starts to generate more income compared to offering a holiday let without the extra services.

For a fully furnished luxury chalet bought at €1,200,000 including VAT, buyers could see their contributions towards legal fees, furniture and deposits drop from €266,000 to just €57,667 thanks to the new scheme and VAT rebates.

“Buyers can stay in their chalet whenever they like and it will be available for rent the rest of the time,” adds Mitchell.

“The rental income from the chalet will not be liable to French Income Tax, but as they live in the UK they will need to declare the income on their UK tax return.

“However, as the UK HMRC qualify this type of rental as a ‘Furnished Holiday Let’ the income is exempt from recent tax legislation targeting buy to let landlords and they can offset all the expenses to reduce any UK income tax.”

He says: “France has a history of being one of the most regulated and stable property markets in the world.

“And as a favourite destination for international travellers, combined with low mortgage interest rates and generous tax incentives, the future is bright for French property investors.”

 

For more information contact Dylan by telephone +44 (0)207 193 7030 or visit their website www.worldwideproperty.co

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