Property Holding Structures - French Property

When considering investing in French Real Estate investors and their advisors may wish to consider using an Isle of Man holding structure. There have recently been a number of legal changes that make the use of an Isle of Man holding structure an attractive option.

On 26th March 2009 the Isle of Man signed a Tax Information Exchange Agreement with France (“the French TIEA”). On 23rd February 2010 the French TIEA was approved by the French Parliament and can be brought into effect at any time by a French Government Minister.

One effect of the French TIEA is likely to be the possibility for Isle of Man companies to invest in French real estate without liability for the French 3% annual tax.

Presently a foreign legal entity that owns French Real Estate falls within the scope of the 3% annual tax. The tax is based on the market value of the property on 1st January each year.

A further development occurred on 2nd March 2010 when new French Trust law came into effect. The new trust law allows trustees to purchase French assets direct in a similar way to investing in English assets. This simplifies the process for trusts based in jurisdictions such as the Isle of Man. The new law allows the trust to borrow by way of a mortgage secured on the French asset. This is a significant development as previously French banks were reluctant to lend to trust vehicles in case the trust vehicles were held to not have any legal existence under French law and could not be required to repay the loan.

Working with your advisors we are able to assist in the establishment and ongoing administration of an Isle of Man structure to hold French Real Estate.

When investing into French Real Estate it is important to obtain specialist tax and legal advice. We do not provide tax advice or advice on French law.

The information on French tax and trust law has been kindly provided by David Anderson, solicitor and chartered tax adviser of Sykes Anderson LLP (www.sykesanderson.com).