Real Estate

08 January 2014

France Millionaire Tax 

After a false start, French President François Hollande appears to have finally won approval for his proposal to levy a tax rate equivalent to 75% on salaries above €1m a year. Now analysts are asking whether the controversial levy will affect the country’s property market.

The idea of a two-year special tax on the highest earners was one of Hollande’s campaign pledges as a presidential candidate in 2012, but his initial proposal was rejected by France’s constitutional court.

Now the plan has been reworked as a levy on companies of 50% of any income they pay higher than the €1m threshold for 2013 and 2014. Including social security charges, the impact is the same. The court has ruled that the revised scheme is constitutional.

Hollande’s plan has aroused the ire of football club chairmen, who say it will plunge their teams into debt, and celebrities like actor Gérard Depardieu, who moved just across the border into Belgium.

Property experts believe there are signs of a fall in demand for properties in prestigious parts of Paris and wonder whether anticipation of the 75% tax is to blame.

In the exclusive neighborhood around the Avenue des Champs-Elysées and the upmarket district of Saint-Germain-des-Prés, apartment prices were down by 18% in mid-2013 from a year earlier. Overall, apartment sales across Paris in the first half of last year were more than 20% lower than the average level over the past decade.

Any impact from the tax hike may be hard to separate from the broader effect of a downbeat economic climate. Either way, real estate brokers say that foreign buyers – who are unlikely to be affected by the 75% levy – are increasingly taking advantage of bargain prices for high-end properties.