French Property Set for Trust Investment Boom
March 15th, 2010
Huge amounts of foreign investment are expected to flow into the French property market following the introduction of the country’s first trust law.
The new legislation could allow foreign pension trustees to invest in French leaseback property for the first time, as well as encouraging high net worth individuals to move offshore funds into the property market without major tax penalties.
Before the law came into effect on 2 March, France did not recognise the concept of a trust or fiducie. Trusts are commonly used in other countries as a tax-efficient way of investing in property.
“It could be one of the biggest developments in overseas property for the next decade,” said chartered tax adviser David Anderson of law and tax firm Sykes Anderson, which has already begun helping clients looking to take advantage of the new law.
“We’re seeing quite a run of high net worth individuals with offshore funds focusing on trophy properties and asset classes that can’t be bought in the UK, such as vineyards and ski lodges, as well as prime agricultural land,” said Anderson.
“There will also be interest in prime residential areas such as Cap Ferrat in the South of France and central Paris. It will create an immediate benefit to the €10 million-plus property market.”
SIPP leasebacks
Developers of leaseback property are also excited by the news because of the potential for Self-Invested Personal Pension (SIPP) investment from the UK. Pierre & Vacances (P&V) launched a leaseback investment for Irish pensions at the end of last year and now hopes to follow with similar UK product.
“We have massive interest from clients and introducers looking to invest in this way,” said Nick Leach, head of P&V’s UK and Ireland office. “We didn’t get to a point where our notary was happy with the product before and hopefully the change in the law will have some bearing on this.”
SIPPs are not allowed to invest in residential property but Leach said he was confident that P&V’s leasebacks would satisfy tax office rules. “Our properties are apart-hotels and the owners sign away all rights to use them so I’m quite happy they can never be defined as residential.”
Anderson added that the change in law would encourage more SIPP providers to invest in foreign property. “In fact, SIPP providers will be forced to go into this market or else lose business,” he said.
Tax advantage
As well as passing the trust law, France has also signed tax information exchange agreements with a number of tax havens including Jersey, Guernsey, the Isle of Man, the British Virgin Islands and the Cayman Islands.
“This will allow investors based in these locations to buy property in France without the previous 3% gross annual tax penalty,” said Anderson. “This and the absence of a trust law were two major obstacles for foreign investors so it is an amazing turnaround.
“Trusts will be able to buy residential property that no one’s been able to invest in for the last 50 years, and key agricultural property of the kind that only comes onto to the market every two or three generations.”
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keep the huge pension funds away from the food growing land or youll be sorry,theyll drive the price up so high that real farmers cant expand,theyll make the whole sector unviable and then it will collapse,leaving the taxpayers to bail them out,only after causing total caos to the whole country.