France to slap tax on foreign-owned second homes

France is to hit non-resident owners of 360,000 second homes – many of them British or Dutch – with a new tax equal to 20 percent of the properties’ rental value, under a draft law unveiled on Wednesday

Property dealers immediately warned the measure, designed to cut France’s yawning budget deficit by about 176 million euros per year, would have a chilling effect on the holiday home market in rural regions like the Dordogne.

Some also questioned whether it might breach European Union laws intended to ensure the free movement of capital, despite also applying to French citizens who are resident abroad but keep a second home in France.

The draft, which was approved by President Nicolas Sarkozy’s cabinet on Wednesday and is expected to pass parliament in time to become law in 2012, says second home owners should help pay for French public services.