Stamp duty on real estate transactions remains applicable
French departments can apply a voluntary increase in stamp duty on real estate transactions as of March 1 2014 but Paris may decide not to.
Real estate transactions in France are subject to stamp duty, which the buyer pays. The rate is currently 5.09% of the price of the property and breaks down into:
- A departmental (county) tax of 3.80%. Paris is classified as a county.
- A communal (municipal) tax of 1.20%. Each arrondissement (district) of Paris counts as a municipality.
- A national tax equal to 2.37% of the county tax. In other words, 0.09% of the total stamp duty.
The French parliament has been debating the draft finance law for 2014. It will give French counties the voluntary and temporary authority to increase their share of stamp duty from 3.80% to 4.50% of the purchase price. This would bring the total stamp duty payable to 5.80% in counties that decide to apply the increase. The law aims to enable counties to finance the benefit payments for which they are responsible and which have increased significantly in recent years.
At first, the draft law ruled that counties deciding to do so could levy the increased rate for two years, as of March 1st 2014 until 29th February 2016. A recent government amendment brought the start date forward to January 1st 2014. But this would not have given the counties enough time for proper debate and application of the increase. So a further government amendment, voted the following day, put the start date back to March 1st 2014.
Before parliament voted on these amendments, Paris had already signaled that it did not intend to increase stamp duty on real estate transactions in 2014. This was good news, since it would have added several thousand euros to the price of a Paris apartment.
However, although the increase in stamp duty remains voluntary, the further amendment now gives the government the power to take 0.35% of the total stamp duty that all counties collect (up to a ceiling of 12% of the total sum). It will redistribute this among the counties that need it most to fund their benefit payments.
So Paris has to decide whether to absorb the cost of this additional tax or to cover it by increasing stamp duty on property sales. Mayor of Paris Bertrand Delanoë criticized the government’s move for its likely impact on the real estate market and on Parisians’ pockets.
We’ll bring you updates on this story. In the meantime, if you are in the process of buying real estate in Paris, ensuring you close the deal before March 1st might be a good idea.
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