Isle of Man residents with second homes in France need to act quickly to complete their French Income Tax returns. One French tax specialist is warning those people with property on the continent that failing to file the relevant returns by the June deadline can lead to penalties and assessment in arrears.
“The filing deadline for their 2008 French income tax return is fixed at 30 June 2009,’ said Director of PKF (Isle of Man) LLC, Phillip Dearden. “It is a legal requirement for anyone with a second home or homes in France, whether it is for rental purposes or not, to file tax forms every year before 30 June. The absence of any double tax treaty between France and the Isle of Man means that Isle of Man residents are liable to pay French income tax in respect of their French property."
Taxable income in France is calculated as three times the annual unfurnished rental value of the property, and the tax is due whether the property is rented out or not. This is the result of Article 164C of the Code General des Impots. Notional income taxation applies only if the taxable basis is greater than any real French rental income received, which is generally the case. The tax charge applies whether the property is owned directly or indirectly. It is possible to obtain an exemption from this but only if the following conditions are fulfilled:
a) The taxpayers are nationals of a double tax treaty partner country, and b) They file the necessary information to prove that their personal income tax liability in the Isle of Man is at least two thirds of what it would have been if they were registered as full-time French taxpayers.
Mr Dearden added "To establish their individual tax position, those people in this situation need to disclose all their worldwide sources of income and calculate the French income tax liability as if they were full-time residents of France. This can be a complex, frustrating and time-consuming exercise and taxpayers will not know whether it has been worthwhile until they have completed the whole process. Plus it has to be done every year."
Whilst the Isle of Man has recently signed a Tax Information Exchange Agreement with France it has not yet come into force. Unfortunately this agreement does not eliminate the effects of notional taxation but it will extend the possible exemption claims to Isle of Man nationals.
Isle of Man residents with property in France can contact Phillip Dearden at phillip.dearden@pkfiom.com or through the local PKF office on 652000 full details at www.pkfiom.com.
