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French Property Taxes: Another Important Change
The UK press* has recently been frowning upon owners of expensive UK real estate seeking to avoid stamp duty land tax ("SDLT") through the ownership of the property via an off-shore company. Whereas the transfer of the property itself would be subject to this tax at a rate of up to 5% of the consideration paid, the corresponding transfer of the shares in the off-shore company does not attract SDLT.
The French tax authorities have however moved to block tax such avoidance. With effect from 1 November 2011, the buyers of shares in a non-French property company are required to register the share transfer in France and pay a 5% French transfer tax on the purchase. Please note that these new rules apply to a company whose assets are mainly either French real estate or rights thereover.
So if you own your French holiday home via a UK company and sell the shares in the latter, the purchaser will be potentially liable not only to a 5% French tax bill but also a 0.5% UK stamp duty charge. Although double tax treaties do not generally cover stamp duty, the French tax code does allow unilateral relief. This means that the UK duty should be creditable against the additional French tax now payable.
The French tax must be paid within one month of the share transfer and must be registered by a French notaire. Local advice should therefore be sought in respect of these matters as appropriate.
*No doubt ultimately owned by a company resident in some warm, overseas tax haven.
