ASK THE EXPERTS
Whether you’re planning your move to France, or are already living there, our panel of professionals aims to keep you fully informed with the best advice for every eventuality
Our experts give their advice on social charges, renovation grants and mortgages
We have just received a demand for social charges, something which we have never received during the past 16 years being residents in France. We are permanent residents and we have a R121 form and now an S1 which we understand has exempted us from these charges. The local tax authorities have not been very helpful telling us that new rules are applicable, and we have never received any notification of this. William and Carol Ross
France levies up to six types of social charges on all forms of income and gains. These charges are distinct from social security and do not give rights to healthcare benefits.
The overall applicable rates are:
15.5% on investment income (including capital gains). 8% of earned income (employment and self-employment). 7.4% on pension income.
Social charges on earned income and pension income are only payable if you are French resident and affiliated to the French health system (i.e. you generally need to be paying French social security contributions or protection maladie universelle contributions). Form S1 does not exempt you from social charges although in most cases if you have this form you should not be affiliated to the French social security system but instead to the country who delivered the form. So it is possible that you are now paying social charges because, although initially you were not affiliated to the French social security, you are now paying French social security contributions (for instance you started a French business, such as a chambres d’hôtes).
Social charges on investment income (dividend income, bank interest, etc) are due if you are a resident of France. They are also due on French real estate investment income (letting and capital gains) if you are non-French resident. Not being affiliated to the French social security will not exempt you from these charges. This means that you may not have paid social charges because until now you were only receiving pension income, but you may now receive investment income (e.g. you just sold your UK property) which is normally subject to social charges.
I can only make general comments about your question but other personal circumstances such as employment abroad or tax residency may explain why you were not subject to social charges and therefore I would recommend that you speak with a specialist. ROB KAY Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
Irecently bought a property in France which requires complete renovation, and believe there may be certain grants available for renovation work. What do these cover and would I be eligible for them? If so, how do I apply? Simon Byrne
There are a number of grants available for renovation projects in France. Le crédit d’impôt pour la transition énergétique (CITE) is a grant for renovation work that improves the energy efficiency of a property.
Available to the owner-occupier or tenants for their principal residence, it comes in the form of a tax credit or reimbursement. You can claim up to 30% of a maximum of €8,000 for a single person or €16,000 for a couple, plus €400 for each dependent. Available through 2016, it looks likely to continue into 2017.
Another option available is the eco loan that has a 0% interest. Available to all homeowners or tenants, this loan
must be used for work that improves the thermal efficiency of the property or for the installation of a sewage system. The loan is for up to €20,000 for two elements of energy conservation and up to €30,000 for three or more, while a maximum of €10,000 is available for sewage systems. The repayment period is normally from three to 10 years but can be extended to 15 years for renovations that include three or more measures.
To be eligible for this loan, you must either achieve a minimum overall level of energy efficiency for the dwelling, calculated by a specialist, or undertake the installation of a sewage system.
If you do not satisfy these conditions, you may still be eligible by undertaking at least two of the following energy conservation measures:
Insulation of all the roof. Insulation of at least half of the surface of the exterior walls. Replacement of at least half of the exterior windows and French doors. Installation or replacement of heating systems or hot water tanks.
If you’re not embarking on an eco-friendly project, it’s also helpful to note that the rate of VAT (TVA) for general renovations is 10%, down from the 20% standard rate, however there is a special rate of 5.5% for energy-saving measures and materials.
You can also get grants, subsidised loans and energy surveys through the main energy suppliers while the Habiter Mieux programme from the organisation Anah (Agence nationale de l’habitat) offers a number of grants for low-income groups.
Local and regional councils also offer a range of different incentives from local tax relief to grants and loans. Check with your local town hall or visit renovation-infoservice.gouv.fr/trouver-un-conseiller/step1 for more information. PETER WHITE
Iam in the process of looking at properties for sale in France with a view to buying one in the near future, and intend to finance it with a French mortgage. I’m considering a complete renovation project and would like to know whether renovation mortgages are available in France and, if so, how do they work? Also, am I likely to find it more difficult to obtain a French mortgage as a result of Brexit? Kathleen Brennan
Firstly, the question on everyone’s mind at the moment is whether Brexit has made it more difficult to obtain a French mortgage. So far, it hasn’t, as Britain’s exit from the EU hasn’t as yet taken place and at this point in time no one knows what deal will be struck between France and the UK. When it comes to mortgage lending from French banks to British residents, it is still very much business as usual.
However, an immediate impact of the Brexit vote is the value of sterling against the euro, as sterling has lost ground and isn’t stable. This has impacted how much people with GBP income are able to borrow in France, as they are getting less euro for their pound. The consequence this has on obtaining a French mortgage is that when a borrower’s income is converted into euros, it is less than what it was before and this in turn means they have less borrowing capacity. Regarding a property with renovation works, it is possible to finance such a property with a mortgage and there are four main options.
The first option is to use a French mortgage to finance just the property purchase and then finance the renovation yourself. This gives you greater freedom to carry out the renovation work yourself and to purchase your own materials, etc, as and where you wish. However, there are less banks willing to do this as the risk for them is greater.
You could also use a mortgage to finance the property purchase and the renovations. There is no strict rule of thumb as to how much you can borrow mortgage wise in terms of a percentage of the property purchase price, however the project must be logical and must remain residential. The banks will request that you submit full quotes from tradespeople for the works to be carried out and, where planning permission is needed for the renovations, the bank will also require that you have an architect oversee the project and request a copy of your contract with them also. The banks will base their willingness to lend on a valuation that they carry out on the property and base their maximum loan-to-value/mortgage amount on this.
You could also buy the property without a mortgage and then arrange to have a mortgage to carry out the renovation works. Quotes and details of the renovations will be needed and the bank may or may not require a valuation depending on the value of the mortgage.
Another option would be to buy the property with a mortgage without any additional funding for renovations and then take the necessary time to decide which renovations you would like and obtain professional quotes. Once you are ready, apply to the same lender for a second mortgage in order to finance the renovation costs. Beware, however, that some lenders have minimum mortgage amounts so it is important to find out what these are before arranging the initial mortgage so that you do not fall foul of the minimum amount when you want to arrange your new renovation mortgage. This is because it is considered a separate mortgage so the amount is not combined with the initial price. SHARON HILL