Number 93 - January 3 2005

France Voila, the newsletter and weblog from Rentals France and the French Property Digest. You will only receive it if we have been given your email from one of our websites and asked for more information.

In this issue...

1. I want that one - Investing in French Property
2. Painting the Town
3. Yes But - No But - Yes But
4. A Christmas Tale
5. Request from Oz

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Since the last newsletter I have sold our house, bought another one, made six trips to the UK - reinvented Internet marketing - written a three volume Victorian novel, solved the DeVinci code, made love to ten thousand women and calculated the square root of minus one. OK, so four out of eight aint bad.

Our team is growing and through this year we are launching many new websites and services.

The aim of this newsletter is to share experiences about living in France and to give information about living or visiting France. On that note, the best book I have ever read on this subject has just been published "More France Please We're British" by Helena Frith-Powell. at £9.99. By Gibson House Books ISBN 1903933360. Here is a link to a review http://francevoila.com/newsletter/book.jpg - it is not yet in Amazon but I will pass on all requests direct to Helena who is as sharp as a pin, as pretty as a picture, as bright as the sun and as clever as cornflakes.

Our new village is Montblanc - not in the Alps but here in the Herault - from next week I will explore and comment on our new home, no chance of getting Montblanc.com though.

Do click on the sponsored links - it makes it possible to keep writing.

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1. I want that one - Investing in French Property

My biggest mailbag is about buying property in France, in January we are pioneering some new websites about French Propery and will be offering some unique features for owner, renters and buyers.

I try to reply to all mail, especially if, like Michael, a reader has already looked through the archives and asks relevant questions.

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Hello,

I have been studying your website, and found it very educational.

Lately I had become interested in buying a second home or two in France or some other country. I like old stone buildings, and my idea was to buy one (maybe even an old barn), remodel it, and rent it out to tourists or locals.

From your website is apparent that there are many regulations in renting properties, and even remodeling them. I am a US citizen, and unfortunately do not speak French, and quite reluctant to step into a big headache.

If I would undertake projects like that, I would want someone local and already in this business, knowledgeable, and reputable to guide me through it, and to take on all of the paperwork (I will be responsible for remodeling the property) associated with remodeling, rental, paying of taxes, etc. Is my thinking realistic, and can you recommend someone if you are not in a position to accommodate it.

Kind regards,

Michael

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Hello Michael

Buying property in France is simple and secure, prices are still realistic for a fair return and there is a wide choice.

Choosing a property suitable and viable for investment is a skill needing a lot of local experience, this is true of anywhere in the world, not just in France

A working knowledge of French is vital, all contracts and negotiations are in French and there are many questions which must be considered, surveys are not generally made and the Notaire is not responsible to ask vital question about access or permissions on your behalf. Knowing the questions to ask and the ways of finding out information about roads, building work, rights-of-way and other local regulations, developments, quarries etc. The bottom line is that there is no one obliged to look after your interests or take responsibility for anything; The onus is on you to make sure all questions are asked and correctly answered.

Planning, change of use, building regulations, historic monuments etc are reasonably straightforward, but again a local expert is essential.

Taxation and finance are also straightforward in France. Again I strongly recommend local and specialised advice, choosing the best tax regime is important. It is also very important to decide the best way to register the ownership of any property in France due to wealth and inheritance taxation regulations.

Local taxes may include a tourism and/or day tax, yet again someone with good local knowledge is needed.

Remodeling property, especially the typical stone built homes here, is much more expensive than building from new. The skills needed are scarce and, unfortunately, there are many "builders" who have little experience in this work and offer illegal services. All tradespeople and employers in France have very high social charges and taxation and they are strictly controlled for this registration, but not for quality. This encourages a big illegal supply of, usually, non-French people to offer services here. To employ someone not correctly registered is illegal and the risks if there was an accident or investigation are not worth it. These facts make the cost of remodelling from 5 to 15 time the cost of building new.

My advice, based on 12 years of personal experience, is to only buy older property which is immediately comfortable and habitable.

Yes, your thinking is realistic, there are many advantages of owning property in France.

If you are looking in the Herault area then I can help and introduce you to fair and reliable people. I have contacts in some other areas.

Best wishes

Tony

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2. Painting the Town

France has always been a magnet for painters, luckily we still get some really talented people calling on us and we have some world class local artists who we merrily share the odd wine and haggis eveing with. Podi is a regular canadian visitor and gives classes here, hope you enjoy her work.

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Hi Tony & Carole

I painted this house in Pezenas some time ago and have just got round to scanning it to send to you. Just a little watercolour I did from sketches.

I really miss not coming to France this year but David and Sally of http://paintfrance.com tell me that its been a very quiet year all round.

My husband and I are scheduled to come to the UK & France in May, anyway. And will be travelling down your way so hope to get the opportunity to visit you.

Best regards

Podi

webpage: http://www.podiarts.on.ca

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3. Yes But - No But - Yes But

Here is a recent mail commenting on my attitude and style of writing about life in France, and my reply. The points are very relevant and I hope neither of us pull our punches.

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Greetings Tony - et la Famille !

I have been following various articles and news/views on your website for quite some time. Firstly, let me congratulate you on your site - a project of gigantic proportions, that is interesting, useful and informative.

It is obvious you cherish your wonderful quality of life in the south of France, as well you should - despite the annoyances, and 'hassles' you illustrate so clearly.

Sometimes, perhaps erroneously, it appears that you are excessively negative about a great many factors, and tend to exaggerate some of the generalities - a very French quality, in fact. A "railleur" .

Some examples :-
---Taxation :- France is a highly taxed country, as are many others in Europe. In fact most are within a few percentage points of each other in total tax load. But with the taxes- which are heavily weighted towards consumption taxes, go the services. Jack's unfortunate accident last year illustrates perfectly what you get for your taxes. The education and social services are acknowledged to be amongst the finest in the world. Education and health are considered to be an investment in the society, not an expense - which is so often the case in the anglo-saxon countries.

You complain of a 50% tax rate. Well here in Canada, we have a 'max-tax' of 52%, which kicks in at a relatively low annual threshold level of C$ 55.000 (about 36.000 Euros.) In France the max tax kicks in at a far higher level of annual income. At the same time a large proportion of the lower earners in France pay little, even no income tax at all.Here in Canada we have people earning at,or below the poverty line, (approx 12.000 Euro per annum for a family of 4....) paying income tax of 15% to 25%. We too have a VAT - close to 16% in most provinces.

Despite our tax load, we do not obtain the corresponding level of services. Hospitals are swamped, waiting times to see a family doctor - if one can get one - are as long as 2 months. Waiting lists for most operations are in excess of 6 months - even for 'emergencies'. There is little of no pre-school care, originally 'free' public and good education is now increasingly expensive , and university - literally free a few years ago, now costs in excess of $ 10.000 per annum in most provinces - excluding residential costs etc.

Let us flip south of the border to that bastion of low-taxes,(max tax in the region of 38% for people earning in excess of US$ 250.000 per annum...)the good ol' USA. Most states are in such dire straights because they cannot tax at appropriate levels, that schools, hospitals and social (fire, police etc) services, have and are being drastically cut and even abolished. Infrastructure is deteriorating - and yet the people refuse to let themselves be taxed. Everyone wants the services - but don't want to pay the price.

The deterioration in the standard of living of a very large portion of the US population over the last decade or so is very evident and sad. Eventually it will become dangerous. Almost 48 million people cannot get health insurance - and even when they can it is expensive . Average policies for a family of 4 now cost in excess of US$12.000 per annum - and the policies are full of initial deductions, limits on costs and limits on the type of Health or operations that are eligible under the policy. Are not such costs an indirect tax ?

Because of a 'low-tax' policy, which continues, the US is becoming incapable of educating its children, providing acceptable, rather than very poor, health services to a large proportion of the population.

Look at public transport, railways, the roads, the infrastructure. Here in N. America we are almost undeveloped in comparison to France and Europe !

It all comes down to a difference in basic philosophy. In most of Europe, including France , it is unthinkable that people would not have universal health care, or good social services and benefits. You choose your system, You pays the price! And pretty well, you get what you pay for, like in everything.

--- Employment:-
Yes, France - and many other European economies - have high unemployment in the 10% range or even more. A lot of things can be done to 'ease' the flexibility of the labour markets in France and much of Europe, but again its not an elixir necessarily. Despite a much more flexible labour market here in Canada, we still have 8% unemployment. Even the good ol' USA has 6% unemployment. And those that work at the 'bottom' earn half of what they did (real earnings) as they did a decade ago. Many low-income workers in the States have to hold down 2 even 3 jobs to make ends meet. The minimum wage has not been raised for 8 years in the US - in many areas it is still in the $ 5 per hour range. Impossible to live on. All at the same time the top 5% of the population continues to enrich itself beyond any measure. Sane ? certainly, there are probably pockets in the south of France that may have 30% unemployment (the average unemployment rate through PACA and Languedoc-Roussillon is 12%...), but such figures apply in small areas of a lot of other countries - including the UK.
--- Costs:-
Again the cost of living in France is high , but for you to say its higher than the UK or the USA is simply not true. Anyone who has visited the UK in recent years - and I am there a few times a year - is basically paying in Pounds, what costs Euro in Europe and France! And it is not just tourist London with its hotels at Stlg 200 per night (for a rather cramped and small room), English breakfast at Stlg 15 and more etc. but the general cost of everything. Costs are often not much cheaper in the provinces...Part of the surge of people 'moving' from the UK to France is because of the high cost of living in the UK.

---Tourism :
Again it is a little disconcerting to note your exaggerations. In 2003, tourism in France was down by 2 million people - or a 3% decline , NOT a 20% decline...But the same scenario applied to a lot of other countries too, including the UK - and the USA (where the drop was in excess of 20%...). Was not the fall in tourism due more to the prevailing situation in the world, than the 'situation; in France ? It was not a banner year for tourism generally.

Most definitely, other tourist destinations are increasingly accessible and cheap - N Africa, Turkey, South Africa etc - and increasingly many Europeans who used to stay closer to home and travel in France , and southern Europe , are 'spreading their wings' to more exotic destinations.

But this year (so far) the tourists are back, and France has seen a 5% increase in its visitor numbers - including of course, more Americans, who stayed away in droves last year. More importantly is the upsurge in Oriental (Chinese, Japanese) visitors to France, and Europe in general. This is a market, given its rapidly growing disposable income, that can only grow rapidly in the coming years.

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Taxes on Secondary Homes etc:-
You have had a great many articles on this subject. I have a secondary home in the south of France (Opio) which we built after a lot of investigation etc with the appropriate authorities. Yes, there is a lot of bureaucracy involved, but if one pre-invests, and investigates in advance, the various channels to be navigated, the 'red tape' an be handled with relative ease. One thing with the various French bureaucracies is that they are highly efficient and productive, when you have the appropriate channels. The tough controls, zoning laws etc are one reason why the French countryside is so beautiful and appealing - unlike the ruined, depressing landscape of so many N American cities,(gasoline alleys') where zoning laws are minimal and the hodge-podge of bad development assails the senses !

It was suggested, for my specific circumstances, to set up a SCI (Societe Civile Immobilier) to build and own the house. The 'company' is owned by its shareholders, who can buy and sell the shares, if so desired. An SCI circumvents the succession laws and duties that apply in France - a very important consideration that must be taken into account.

Any rental revenue is considered to be corporate income, and after proportioned expenses, is taxed at a corporate rate of 15% . If / when the house is sold there is of course the CGT - but then that is usual and normal anywhere in the world, on secondary properties.

Canada, like the UK, has a tax-agreement with France in order to avoid 'double taxation. As the property is in France, the taxes from that property are paid in France. As an SCI the company has to produce annual financial statements - a simple and cheap matter. As a Canadian, I have to report to the Canadian tax authorities, my / our investment in the 'foreign' SCI. A copy of the French financial statements are presented with my personal tax returns in Canada, but the SCI is not taxed here, as taxes have already been paid in France.

Should I take a 'dividend' or profit out of the SCI for personal purposes, then it becomes personal income in Canada, on which I of course, have to pay taxes in Canada (in addition to whatever French taxes have been (paid on the SCI). Natural.

I have never understood why people who rent out their secondary homes - personally or otherwise - cannot accept the fact that they have to - or should - pay taxes on that revenue. If taxes are paid in France, then a corresponding tax credit is allowed in the UK - or wherever - on that income and taxes, providing there is a tax-agreement between the two countries.

A last observation. You mention that in France, when it comes to tax disputes with the authorities, one is presumed guilty until proved innocent. Once again, this is NOT unique to France. In almost every country of the world, if someone is suspected or investigated for taxes, they are guilty until proved innocent. Its the only branch of governments that works on this premise. This the property, asset and other seizures made against 'alleged' criminals, tax invaders, drug lords etc - including the USA and UK. Long before their cases go to court, their assets have been seized and /or frozen. Wheres the difference ? After all. Al Capone was caught on evasion of taxes - not for his other criminal activities - murders, intimidation, bootlegging etc . Is that not always the case ?

Thank you for permitting me to make some observations on your site. And please continue the good work. I will continue to follow your sites, with eagerness and interest.

Yours Truly
Tony
Montreal

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Hello Tony

Your mail deserves a thorough reply, it is interesting to read your reaction and I will try to respond objectively.

We have chosen to live in France and moved here from the UK 14 years ago. We considered many places, some of which have strong advantages over France for some aspects of living.

I agree absolutely that my writings and opinions are only from my personal and individual viewpoint at a specific place and time, I never try to summarise or extrapolate facts or opinions from others. The data I use is that which I either personally observe or can see to be accurate in relation to my own experience. If this seems to exaggerate some of the generalities, then this was how it was to me at the time and perhaps the generality is therefore a relevant truism.

To respond to specific points in your mail:

Taxation - Average income in France is low, direct taxation therefore is low as many people are below the threshold, but social charges plus secondary and tertiary taxation accounts directly for over 50% of all income for everyone.

Yes, with high taxes, health and education benefits are excellent, transport is cheap and public amenities are very good. Food and public services are about the same as most countries. In general the cost of living is now about the same as most of Western Europe.

Employment - Interestingly commercial productivity in France is one of the highest in the world, higher than the UK or the USA, this is mainly due to the fact that investment in machinery, systems and equipment is very high as the cost of employing people is prohibitive, this also leads to a huge unemployment problem, over 10% and up to 30% in some regions.

Public sector employment is a joke, more than half the revenue collected from direct and indi