Too good to be true leaseback in France ?

Re: French Mortgage from Dublin Company

Harry deals with Entenial bank and is well informed and very helpful. Whether Entenail bank is the right bank depends on the type of loan you're looking for and the property.

Re: French Mortgage from Dublin Company

Hi,

I have some family members who have asked me for advice re:leasebacks in France.

With my limited knowledge of French law, the two areas I would be most concerned about are:

(i) Has anyone looked at the CGT implications in France and in Ireland if the property was sold at a later stage for a profit.

(ii) If the property was retained, how crippling are French inheritance taxes?


Can any more informed person throw light on these subjects?

Regards,
Punter2005

Re: CGT + IT

Hi Punter2005

There is a tax treaty between Ireland and France but it predates the introduction of CGT. Therefore, it may be that on selling a French asset you would have a liability in France and Ireland and you can't offset the French CGT against the corresponding Irish CGT. This is a problem if you're looking to off-load the asset after a short period of ownership. However, because French CGT reduces considerably after 5 years of ownership, it may not be so bad if you're looking to retain the asset for longer periods of time. Also, the French CGT for overseas buyers is not as high as it once was.

French inheritance law is very different to that found in Ireland. The rights of children to inherit from their parents is protected by French law. In addition, it is only recently that the rights of the spouse has been protected. A French will cannot override the rights of the children. It is very difficult to give an overview of the inheritance system in a few short lines. If you wish PM me and I will forward on details that I have.

Regards,
Paidi

Apologies for raising the issue of claiming mortgage interest (where mortgage is raised in Ireland) when it comes to submitting tax returns to the French Revenue in respect of rental income on a leaseback property. Having read through this discussion, there is a matter which perplexes me. It would seem to me that, if there is an impediment in France to claiming such mortgage interest, that there is a strong possibility that this is anti-competitive. As an EU resident, I should be entitled to raise the mortgage in any EU country in respect of the purchase of a property in France and that I should be entitled to claim the mortgage interest as a deduction from the rental income when it comes to assessing my tax liability in France. If I am unable to do this, then this is effectively a barrier to me taking the mortgage out in Ireland and this puts the French mortgage providers at a distinct advantage, which would seem to be contrary to the spirit of the EU. Furthermore, it puts me at a distinct disadvantage as a consumer as I would effectively be compelled to take the mortgage out in France to minimise my tax liability. I intend purchasing a leaseback in France and am determined to get to the bottom of this issue as I want to take the mortgage out in Ireland (secured against my property); it would be more straightforward, would avoid initial costs associated with taking out a new mortgage and my current mortgage provider has an excellent rate which I would find hard to match in France.
Has anyone been in contact with the French Revenue about this matter? I would be obliged to hear of the definitive stance on this issue.

You're suggesting that the Irish state should effectively subsidise the investment of funds in another member state. Don't expect much support at governement level for this idea.

In this instance, it's the Irish government (and not the financial institutions) that may be acting anti-competively. Not sure if governments are within the remit of competition law but even if they are, they're unlikely to fold just because you want to buy a leaseback. If you are taking them on, it'll cost you a lot more than the mortgage interst relief you might accrue.

Tax harmonisation among all EU member states would perhaps overcome this difficulty, but again, that's not goingto happen in the short term either.

Maybe you misunderstood my post. I am not in any way suggesting that the Irish Government is acting anti-competitively; if there is a barrier/impediment to the claiming of Irish mortgage interest in France in respect of an investment property in France (ie when submitting tax returns in France), I am merely trying to get to the bottom of what this barrier or impediment is. The query relates to the French revenue's stance on the claiming of such mortgage interest relief, not the Irish government's stance. I respectfully suggest that EU governments are bound by EU competition laws.
You will note that when it comes to making tax returns in Ireland in respect of investment property in France, the Irish Revenue will allow the mortgage interest to be offset against the gross rental income.
I would still welcome any (constructive) feedback on this issue.

So you're wondering why the French Gov doesn't allow interest relief against money borrowed elsewhere? Probably because they'd rather you borrowed it in France to support their economy rather than someone else's. Makes sense to me anyway.

By the way, governments aren't covered by competition law so if you feel they're acting anti-competitvely, it'll require legal action on your part. Good luck with this. We're all with you.

The Sun Finally sets, what the RICS has to say about second hmes in the Med,

http://www.telegraph.co.uk/property...l&sSheet=/property/2005/04/29/ixpright12.html

I have some good news to impart about the position in relation to claiming mortgage interest as a deductible from rental income in France where the mortgage is taken out in Ireland.

I contacted the French Finance ministry some weeks ago to ascertain the position from their point of view. I was informed by them that if the mortgage for the purchase of the French property was taken out in Ireland, then the mortgage interest would not be treated as a deductible from rental income in France.

In the meantime, I referred the matter to SOLVIT (the network set up by the European Commission and EU member states to help citizens & businesses get misapplications of EU law corrected). I had to submit quite a lot of detail in support of my application (copy email correspondence with French ministry, copy of purchase contract, details of Irish mortgage etc [the mortgage for the french property is secured against my property in Ireland]).

I have today received a response from SOLVIT to the effect that the matter has been resolved, my complaint has been upheld and the Finance Ministry were incorrect in the reply they gave me to my query. Therefore, where a mortgage is taken out in Ireland for the purchase of a property in France, the mortgage interest is deductible from rental income in France.

SOLVIT resolved the matter for me in less than 2 months and the resolution service didn't cost me anything.

I hope this information is of some use to ye.

Oscar

Thanks for the information.

I suspect, however, that SOLVIT's interpretation is something the French Finance Ministry won't necessarily accept lying down, given the implications of such a ruling.

Is there any evidence that they have ACTUALLY altered their policy as a result?

M

Magoo,

SOLVIT have confirmed to me that the French tax authorities have agreed they were mistaken (ie the matter was resolved by SOLVIT in conjunction with the French ministry).
I am currently awaiting a faxed copy of the tax authority's response which I should be in receipt of today.
I will get in touch with my contact in SOLVIT to ascertain if others can check the result of the SOLVIT finding in relation to my complaint. You may then be able to check out the finding for yourself.

Regards,

Oscar

By way of an update on the mortgage interest relief issue:

My contact in SOLVIT tells me that he has been assured that the French finance people will now give out the correct advice in relation to this matter.

If you need to contact the French ministry about the matter the email address is accueil.cinr@dgi.finances.gouv.fr (Note: when I sent my original query to the ministry about this issue, I sent it in English but they responded by asking me to send it in French, so I had to translate it).

My SOLVIT contact has asked his French colleague if there is any way this information can be put on a website. When he reverts to me about this I will let ye know.

I have now received a copy of the Ministry's reply confirming the correct position.

It would therefore appear to me that the matter has now been resolved. If, despite all this, any of ye have problems with the French tax authorities whereby they do not allow the Irish mortgage interest as a deductible from the French rental income, you can always refer your complaint to SOLVIT.

If ye are re-mortgaging Irish property for the purchase of the French property, I would suggest that you get your Irish mortgage provider to state clearly that the re-mortgage is in relation to the French property, as it will undoubtedly be necessary to prove to the French authorities that the mortgage is in respect of the French property; a document from your Irish mortgage provider stating this will prove useful.

Oscar

Thanks for the updates. This will have significant implications for many Irish buyers.

M

I am in the process of purchasing French leaseback property.
Thanks to Oscar for looking into the tax issue (and for sharing with us all).
I am releasing equity from my Irish home to fund the purchase. Is there an advantage in using the mortgage interest cert in France, rather than here. Surely overall because of the double taxation agreement, the same amount of tax will be paid, regardless of where the the mortgage interest amount is deducted. Also my bank here have refused to give a letter stating what the loan they are giving me is for.
Apologies if I am misunderstanding the issues, I am only beginning to realise how much I have to learn about taxation.
Beckster

You will have to make tax returns in both France and Ireland. If the French authorities did not allow you to treat Irish mortgage interest as a deductible from rental income, you would end up paying more tax in France on the rental income. It is my understanding that you would have no way of getting this excess tax back through the Irish system. When it comes to making your Irish tax returns, it is established that the Irish Revenue will allow you to treat Irish mortgage interest as a deductible from the foreign (French) rental income.
In relation to your Irish mortgage provider, if I were you I would be a bit more forceful with them and insist that they give you some kind of confirmation that the re-mortgage is in respect of a foreign investment property. I can't see why they would have a problem with this; the re-mortgage will still be secured against your Irish property, so they are safe. Explain to them that you require it for your tax returns. It is no skin off their nose and you are the consumer after all... you could always take your business elsewhere.

Thanks Oscar.

Possibly being a bit dim here, but does this mean that both countries tax systems allow us for the mortgage interest?
I was assuming that we would be allowed use the mortgage interest relief in one country only. If this is not the case then I can totally understand why its worth getting it allowed in France. That way we would hardly pay any tax in the first few years and as the mortgage interest decreased we would start paying more.

Yes, both countries will allow the mortgage interest as a deductible, now that the French authorities have acknowledged their mistake in this regard.

Re: Irish or French loan ?

hi
i am about to go down the same road myself.
all the mrtg quotes i am getting(from french banks/brokers) are variable rate only.
where are u getting the fixed rate quotes from?

regards
vesuvius

Re: Irish Solicitor

hi

i am considering doing a french leaseback. have been quoted stg 1,350 by a uk solicitor for examining the purchase/lease contracts. seems a bit heavy.
could u pass me the details of your solicitor contact,please?

regards
vesuvius