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The French property market has slowed recently, with prices falling by an average of 7% nationwide since the start of 2012. According to data from FNAIM, the Federation of French Estate Agents, prices in Ile de Paris have dropped by 3.3% for the first time in 15 years. Prices have also begun to decline slightly in Nice and Menton, as well as on the Côte d'Azur, where prices have dropped for the first time in a decade. In Cannes, real estate is 6.5 per cent less expensive than it was two years ago.
However the decline is expected to be short-lived, with Kate Everett-Allen from Knight Frank pointing out that buyers have adopted a more confident attitude since late 2012, particularly as the uncertainty around taxes has subsided. (http://www.propertyoverseastoday.com/news_features/french-property-prices-fall-but-prime-areas-hold-their-ground and http://www.rivieratimes.com/index.php/real-estate-article/items/slight-dip-in-property-prices-but-will-it-last.html and http://my.knightfrank.co.uk/research/?regionid=6)
Brittany is popular with overseas buyers, with average prices in Morbihan at around €160,000 - €250,000, according to Sextant Properties. Prices can double in towns such as Sarzeau and Senet, where a four-bedroom house with garden costs around €350,000. Head north of Ploërmel and prices are on average 15 per cent cheaper with a small, detached house near Pontivy costing around €130,000. Meanwhile a luxury one-bedroom apartment in Gironde could cost around €180,000. (http://www.telegraph.co.uk/finance/personalfinance/expat-money/9836547/French-property-Paris-to-lead-upturn-in-prices.html)
The Code Napoleon designed in 1804 forms the basis of French property law.
Once you have found a property and agreed a purchase price both buyer and seller sign the Compromise de Vente, a legally binding contract confirming the sale price and the completion date. After a seven day cooling off period the buyer pays a 10% deposit. This contract is legally binding although there can be clauses suspensifs, get-out clauses in effect, making it subject to mortgage provision or the selling of another property.
The final contract, the Acte de Vente, is signed by both parties in front of the Notary.
France's inheritance laws are complex and give precedence to blood relatives over any spouse. By inserting a clause tontine in the Acte de Vente – and this can only be done when you sign it – you can transfer the property on your death to the surviving spouse. Detailed legal advice is essential.
Typically allow 7% of the purchase price for resale property over five years old, and 2.5% for property less than five years old and off-plan property.
Income tax rates range from 5.5% to a top rate of 45%.
Capital Gains Tax, which is not applicable on main residences, rose from 19% to 32.5% in 2012. UK residents pay 19% Capital Gains on a sliding scale that will see no tax liable after 30 years.
Inheritance Tax is 5-45%.
France has a double tax treaty with the UK.
France has a wealth tax but new rules which came into effect in 2012 have made it a great deal more attractive to high net worth individuals. The threshold for this tax (ISF) is increasing from €800,000 to €1.3 million with a top rate of 0.5% on assets over €3 million.
Leaseback properties offer substantial tax breaks in exchange for leasing the property back to a letting company. Buyers who do this are entitled to a refund of the VAT – 19.6% – but will have limited access to their property. These properties are generally in top tourist locations like the Alps and coastal regions and are aimed at encouraging 'hot' beds so that property is occupied for more of the year. Owners will get a guaranteed income as well as a few weeks personal use each year. At the end of the leaseback period, typically 9-11 years, the property is yours.
If you plan to rent out property that you own in Paris you must obtain a licence. Failure to do so can incur steep fines.
France is considered to enjoy a high standard of education, at all stages of the educational process whether the child attends a state, private or international school.
As well as international schools, France also has schools which offer what is termed an ‘International Section', accommodating British, American and other nationalities. These offer language and literature studies to a higher level than the standard school curriculum.
These schools are primarily aimed at international students planning to return to school in their home country. Many French students also choose to study at these schools to take advantage of the higher level of language training offered.
State schools are free and state education is considered to be well-organised and well-funded. The curriculum is generally consistent across the country and also in France's overseas territories.
Attendance at state schools is compulsory between the ages of six and 16, although many French children start even earlier at four.
The French education system stipulates 26 hours of classes each week, although when studying for university entrance, this might rise to around 40 hours.
The length of the school day is usually broken down into three hours in the morning, followed by a two hour lunch break, then three hours in the afternoon. The school week runs from Monday to Friday, but in many schools there is a break mid-week with no classes on a Wednesday. (http://www.readyforfrance.com/family/schools.php)
Many schools have classes on a Saturday morning, but arrangements can vary from area to area and parents should check with the school in advance.
School holidays take the form of two-week breaks in the autumn, in December, early spring and then around April-May.
Progress is assessed by report cards issued three times a year.
If you become resident in France you will be taxed as a French national, that is, on your worldwide income. A treaty with the UK goes some way towards preventing double taxation, however, marginal rates vary between the UK and France and as some articles of the treaty do not provide for full exemption then there could be some unavoidable crossover.
Individual income tax in France is levied at a progressive rate reaching a maximum of 41% for high earners. This can be diluted by the French family coefficient system which takes into account the total household income and the number of dependents often to the benefit of larger families.
An exceptional contribution is applicable to income for the 2011 tax year. Income between €250,000 and €500,000 is subject to a 3% charge with income above €500,000 charged at 4%. These tax bands are doubled for married taxpayers.
Additionally, investment gains are now taxed via a mixture of basic rate and various social surcharges at 31.3%. That rate also applies to interest or dividends that are taxed at source, as well as to profits on property sales. A bill adopted in March 2012 will raise the rate to 34,5%.
France also levies a wealth tax for non-residents who hold French assets. Although currently 0.55% for assets worth over €800,000 rising to 1.8% above €16,790,000, these rates are due to change in 2012 to 0.25% for those with assets above €1.3m and 0.5% for assets above €3m. The wealth tax provisions are currently the subject of proposed reforms.
Social security contributions in France are relatively high compared to the UK with social security taxes ranging between 15% and 23% depending on retirement fund contributions and the level of remuneration. And a further 8% social charge applies to all taxpayers.
The information displayed here is correct as of 18/07/2013 and is for general information purposes only. If a customer requires tax advice they should consult their own professional advisers, and not rely on the information contained herein. The greatest care has been taken to ensure accuracy but the Bank cannot take responsibility for omissions or errors. Tax levels or relief are those currently applicable and may change. The value of any tax relief depends on the individual circumstances of the investor/customer.
The information contained in this guide is based on our understanding of current law and tax authority practice and may be liable to change, which could be with retrospective effect. No liability can be accepted for the effect of any subsequent legislation of change of official practice.
Account Holders, depending upon their individual circumstances, may be liable to income tax in respect of interest earned offshore.
It is your responsibility to ensure that any tax liability in relation to funds deposited is accounted for by you to your appropriate tax authorities.
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