It is also likely to make buying French property much more attractive for Channel Islands investors especially since real estate on Hersey is continuing to buck the UK national trend and rise upwards.
The TIEA was signed in March by Chief Minister Terry Le Sueur and the French finance minister, Christine Lagarde. Although the main thrust of the agreement is to establish a formal pathway for tax information exchange it also changes the status of Island residents with assets in France.
As a result a French tax levy of three per cent per annum on offshore companies and trusts with over 50% of assets in French property should no longer be applicable, once both jurisdictions have ratified the TIEA in their respective parliaments.
The French government has shelved the tax in order to boost its property and construction sectors. 'The removal of the annual 3% tax for Jersey and Guernsey investors will be extremely positive for the French property market, specifically investment property. For the first time ever, a big pool of capital residing offshore will be able to flow into France,' explained David Anderson, solicitor and chartered tax adviser for Sykes Anderson Solicitors.
Tax practitioners are being warned, however, that in order to benefit from the new arrangements they must have paperwork up to date. The deadline for filing and paying the tax was 16 May but overdue forms and payments should be sent in as soon as possible.
Meanwhile not all property markets across the Channel Islands are facing steep price falls. In Guernsey residential property prices have slumped by 11% over the last year. But in neighbouring Jersey prices are up 7% in the first quarter of 2009. However, the price increase is lower than it was in the last quarter of 2008 and the number of transactions is also down.
