“The Tax Authorities Want to Tax Your Property at…50%”

Yes, the tax authorities want to tax your property. That was the headline in Trends Tendances on 15 August. We have taken a closer look at this alarming statement for you.

What is this about?

In practical terms, this means that the tax authorities are seeking to tax rental income and property capital gains as professional income. They could therefore decide to tax this income at 50%.

Who is being targeted?

This crackdown is aimed at multiple-property owners. It is difficult to draw up a typical profile of those in the firing line, but there nevertheless appear to be certain criteria:

• risk-taking (use of borrowing)
• speculative intent
• repeated property purchases
• in-depth knowledge of the property sector
• the time devoted to managing their properties: having a job alongside their property investments is less likely to attract scrutiny from the tax authorities.

Reading between the lines, it therefore appears that taxpayers who finance their investment using personal savings or an inheritance are less likely to arouse suspicion.

This proposed taxation therefore targets property management deemed abnormal and resulting in professional income. The difficulty lies in determining what constitutes “the normal management of private assets”. We will refer to the opinion of Denis-Emmanuel Philippe, a tax lawyer at Bloom Law, to define this concept: “I have the impression that anyone who purchases more than five properties using debt, with a view to letting and/or reselling them, is entering dangerous territory.”

How can problems be avoided?

The solution today would therefore be to set up a company for a property project, even if it is a private undertaking.
Of course, this will involve costs, but it entails far fewer risks and offers numerous tax advantages, such as the option of putting succession planning in place or deducting property-related expenses (registration duties, maintenance work, etc.).

Source: Trends Tendance

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