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France Still in Top Three Most Expensive Countries to Sell Your Home

France Still in Top Three Most Expensive Countries to Sell Your Home

Research conducted by Taxand, the world's largest global organisation of tax advisors to multinational businesses, has shown that France still ranks as one of the most expensive countries in the world for the sale of a residential home or flat, with over 20% of the value swallowed by tax in both cases.

The Taxand T3 (Total Tax Take) research, now in its second year, has found that France is the third most expensive country for the sale of a home, with 22.03% of the sale value taken by the taxman, significantly above the average rate across the globe of 16.18%. France sits only behind Romania and Austria which have rates of 22.51% and 22.24% respectively.

The country's tax rate of 20.15% for the sale of a flat places France as the fourth most expensive, sitting behind Romania (21.6%), Portugal (21.21%) and Austria (20.77%).

In contrast, one of the cheapest countries for the sale of a home or flat by tax take is the UK, where less than 7% is taken by the taxman in both cases. This is predominantly due to the SDLT (Stamp Duty Land Tax) threshold on residential units in the country.

The alarming rates of tax on the sale of residential properties in France are predominantly the result of the high rates of income tax and VAT on residential sales. These factors hold significant implications for investors considering investment in residential property in the country, who may consider neighbouring jurisdictions in Europe to retain a larger chunk of the house or flat value upon sale.

The T3 research also examines the tax take on the sale of commercial property, where France, with a rate of 6.88%, is close to the average of 9.5%, though significantly more expensive than the cheapest country, Cyprus, where sellers benefit from a tax take on sale value of just 2.74%.

Keith O'Donnell, Global Head of Real Estate at Taxand, commented:

"Our second review of total tax take in the global real estate market has revealed some fascinating insights. Residential property investors in France remain one of the hardest hit groups, with the hefty tax take on sale values predominantly the result of the crippling combination of high income tax and a high rate of VAT.

A number of other jurisdictions, particularly the UK, present a much more attractive proposition for property investors looking at the residential market.

"Whilst a number of governments maintain high rates of tax in a number of sectors to plug budgetary deficits, they must also be aware of the potentially disastrous knock-on effect that could be caused by a depressed property market."

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Taxand T3 research methodology
Taxand has updated and expanded last year's T3 data.

To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes. The property taxes were usually subject to various country-specific assumptions and modifications as they often differ on municipality basis or sometime just location basis. Those were reviewed by the coordinating Taxand team to assure comparability. Administrative fees, notary fees, court fees were excluded as having a relatively low impact on the overall tax take.

To ensure comparability of the results, certain data has been fixed such as size of the building, investment costs, and 100 percent non-interest bearing equity financing.

With all of that built into the model, Taxanders adopted it to the local law.

Your Taxand contact for further queries is:
Abigail Tarren, Global Operations Director
T. +44 (0)207715 5243

Taxand's Take

Taxand's Take Author