Brexit & French Real Estate _ Any/No change…

When a French notaire with a strong Erasmus and “Auberge espagnole” culture wake up on the 24th June 2016 it is a real shock….

Few years after we have now realised, we have now understood (or managed to…), we have now accepted, we are now where we are and after the end of the transition period (31st December 2020), the United Kingdom (UK) IS a third country with regard to the European Union (EU) and the Economic (EEA).

The French notaire wonders what is really changing now ?

Let’s draw hereby a summary of what is changing from the 1st January 2021 for UK residents owning a French property or planning to sell or purchase one.

And let’s try to conclude that there would be no real change…

What is really changing ?

Social contribution/tax

  • UK residents are now loosing the benefits of the famous ECJ Case named De Ruyter where France has been condemned for prohibited accumulation of social security schemes within EU. UK residents have now to pay social security contributions at the standard rate of 17.2% (instead of the sole solidarity tax of 7.5% for EU/EEA residents) on their annual rental income (if any) and capital gain tax (payable in France when selling a property).

 

  • When selling a French property, UK residents will also have to appoint a tax guarrantor/representative (“représentant fiscal accredité”) to file their capital gains tax returns and guarranty the payment of the CGT in France (keeping in mind that a “good” French friend, a relative or even the buyer living in France can also be appointed…). Professionnal tax representative’s fees are usually in the region  of 0.5% with flat figure on lowest price.

 

The end of European total freedom of movement

  • UK nationals residing in the UK with no Carte de Séjour will lose the automatic right to come and go in France. They will be limited to visit France for up to 90 days within any 180-day period (without a visa).

 

  • UK nationals who wish to move to France permanently will now be required to obtain a long-term visa before applying for residency at their local French prefecture.

What will not change?

No change on taxes

  • Most of the tax arrangements between UK and France are organised by double tax treaties with no connection with EU regulation. And of course Brexit does not change any word of our existing double tax treaties.

 

  • All the taxes are calculating according to French rules only. These rules are not changing at all with BREXIT. The very advantageous French tax rules on calculating the NET taxable income will remain, thus and as long as the tax paperwork is properly managed, most of the furnished rental businesses will remain exempted…

 

No change on Conveyancing

  • Purchasing costs (wrongly named “notaire fees”) that actually includes stamp duties, land registry fee/tax,  notaire fees, and other disbursments remain the same whether the buyer is residing in or outside the EU/EEA:

 

  • 91% + 1500 euros when purchasing an existing property (exists means “more than 5 years old”)

 

  • 74% +1400 when purchasing an off plan or newly built property,

 

  • We need to keep in mind that France does not impose any restrictions on purchasing French properties, there is absolutely no specific treatment for an EU or non EU resident. The buying process will remain unchanged for UK residents.

 

No change on Inheritance/planning

  • Most of the EU regulation that organises the inheritance of a French property are concerning deceased from any country in or out or Europe. UK was not a signatory of most of the EU regulation on inheritance nor on matrimonial reigmes.

 

  • With or without Brexit and for the sole purpose of avoiding a legal “ping pong” we are still of the opinion that any UK resident buying or owning a French property should draw a will in France.

 

  • Any will made under English or French law will remain valid after Brexit.

For a French notaire deeply european Brexit will remain a strange choice but at the end of the day BREXIT may not change so much our practice, and we could summarise that the only significant impact might be the increase of the social contribtuion rate to 17,2 % that creates a 10% increase of the overall Capital Gain Tax when selling…