UK investors in French sale and leaseback schemes should take advantage of "major" opportunities due to a minor amendment to a recently introduced law in France, experts say.
The holiday investment property sector has been sharply stimulated by the Amendement Bouvard, which since its introduction on 1 April 2009, has brought the tax advantages of the Loi Scellier (Scellier Law) to sale and leaseback properties in France.
Introduced on 1 January this year, the Loi Scellier enables tax residents in France to offset 25% of the purchase piece of unfurnished properties against their personal income tax over nine years. The Amendement Bouvard has extended this tax incentive to furnished French sale and leaseback properties in tourism residences and has had an immediate impact.
In the six weeks since 1 April, Pierre & Vacances, the European leader in the development and management of French holiday reports, sold €150m of tourism residences. Investor demand for safe investment vehicles is also contributing to this trend.
While both laws are only directly beneficial to French tax residents, overseas investors could reap rewards indirectly from the supply and demand dynamic the have created.
The laws have incentivised developers to build tourism properties as well as for the French public to re-enter the market, as the attractive tax benefits only apply for properties delivered between now and 2012.
Consequently, overseas investor confidence in the ongoing price stability in the French property market has been boosted, especially in the sale and leaseback sector.
New tax agreements between France and Jersey, Guernsey and the Isle of Man will shortly come into effect. For the first time, companies and trustees managing investment funds in the Crown Dependencies will be able to invest in French Properties without having to pay the prohibitive annual tax of 3% of their open market value. Experts predict this will stimulate the French sale and leaseback sector.
"The imminent removal of the annual 3% tax for Jersey, Guernsey and Manx investors will be extremely positive for the French property market, specifically investment property. For the first time ever, a big pool of capital residing offshore will be able to flow into France," says David Anderson, solicitor and chartered tax adviser, Sykes Anderson Solicitors.
Nick Leach, head of Pierre & Vacances Property Investments, UK and Ireland, says: "The laws introduction demonstrates how quickly French legislators are to react to market conditions and underlines why France remains a safe and stable place to invest."
"Leaseback properties are properties built for tourism and French tourism is thriving so there is a clear opportunity here for overseas investors."
Leach urges anyone considering the schemes to assess the management company of the property involved, its track record and financial strength.
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