France axes plans to tax holiday home Brits

French authorities have dropped proposals to tax foreign and expat second home owners for fear of deterring tourists.

British owners of holiday homes in France will breathe a sigh of relief in the wake of decision by the French authorities to scrap a planned property tax on second homes.

Under the legislation proposed last month, about 360,000 second home owners would have been affected, around half of whom were thought to be British.

The tax was aimed at expat and foreign property owners who reserved their second homes for holidays as opposed to making them available for long-term lets. It was to be based on the annual rental value of the property and was expected to be introduced in January 2012.

But following a meeting at the weekend between French President Nicolas Sarkozy, Budget Minister François Baroin and senators representing French nationals living abroad, the proposed tax was dropped.

Tourism revenues

At the meeting, UMP national secretary for French-British relations, Senator Joëlle Garriaud-Maylam, was among senators who expressed their opposition to the tax. They cited fears that the tax might deter foreigners from buying property in France and could affect revenues from tourism. 

France attracts some 75 million visitors a year and has the third largest income from tourism in the world.

In addition, they added that some foreign property owners, particularly the British, had done much to restore derelict properties in rural areas of the country.

Under the tax, foreign and expat second home owners who rented out their properties for less than six months a year would have been taxed at 20% on the notional annual rental value of their properties. The tax was expected to raise about €176 million (£157 million) a year.

Currently, holiday home owners in France benefit from public services, such as rubbish collection, but do not contribute to the cost of services through income tax. The revenue raised was to be used to finance a reduction in the country's wealth tax. The government is now expected to raise money elsewhere. 

The decision to scrap the tax may well have rested on the fact that French expats – who would also have been subject to the new tax – will for the first time have a chance to vote next year in the presidential elections. Sarkozy is currently seeking a second term in office.

But other reforms were approved. These included measures to bring company-owned properties worth more than €1.3 million into the wealth tax regime.