EU challenge France

The European Commission is taking France to the EU"s Court of Justice in the final stage of its action on the country’s discriminatory tax rules on new residential property according to Harris & Co chartered accountants.

French tax regulations allow investments in new residential property in France which is intended for letting for at least nine years to benefit from accelerated depreciation. However, there are no reciprocal arrangements for similar investments made by French taxpayers in properties to let in other EU countries to receive the same favourable tax treatment.

The Commission says that in practice this means that taxpayers investing the same amount in immovable goods abroad would face a higher tax liability. It considers such provisions to be incompatible with the free movement of capital, a fundamental principle of the EU"s Single Market.

France received a formal request from the Commission to take action to comply with EU law in February 2011, but the French authorities have made no changes to legislation so far. The Commission’s latest move means it will now be facing litigation over the issue.