Capital gains tax on property sale in France and abroad

1)What is capital gain:

It’s basically the tax on the gain you made on the sale of a property (building or land) so the difference between the buying price and the selling price.

2) who pays it:

Any seller who is a French resident and make a gain in France or abroad on the sale of a property or land. And in some case, non-French resident selling a property in France (or land).

3) Conditions to pay capital gain:

• It must be a sale or an exchange (as opposed to an inheritance)
• You must have made a gain
• It must be on a sale of a property or SCI shares. It can be house, flat or land.

3) In what cases you do not have to pay it

• No capital gain on main residence. If you have not sold your main residence when you move into your new main residence, the French government will still consider it as main residence for one year.
• No capital gain on sale below 15 000 euro.
• No capital gain for holiday house for non-resident from an EU state and Norway and Iceland as long as they have been French resident for at least 2 years prior to the sale (new law established in 2014).
• No capital gain on secondary houses if it is the first secondary house you sell since 2012 and you did not own a main property in the previous 4 years and are using the money of the sale to buy your main residence.
• You had the property for more than 22 years (no more capital gain tax) and 30 years (no more social charges).

4) How much is the tax:

• 19 % for capital gain tax
• 17,2 % for social charges

5) Tax reduction:

The longer you had the property, the less tax you pay. The reduction starts after having the property for 5 years:

• 6 % per year from year 5 to year 21
• 4 % for year 22

For the social charges, the reduction starts at year 5 as well;

• 1,65 % per year from year 5 to year 21
• 1,60 % for year 22
• 9 % per year from year 23 to 30

6) How is it calculated:

It is basically the difference between the sale price (indicated on the deeds) and the buying price.

You can lower the sale price by the cost of the diagnostics but also increase the buyer price by the cost of the notaire fees (when you purchased the property) and also work done by artisan or companies to improve the property (you must have invoices). The type of work must be to improve the building, not work of maintenance or repair.

If you did not keep the invoices, you can use an automatic 15% increase as long as you had the property more than 5 years. You can also use this option is the amount of the invoices is less than 15%!!

6) How do you pay it:

The declaration and the payment are done via your notaire at the moment of the sale of the house. It is a special form that the notaires do on your behalf, so you will receive the proceeds of the sale minus the capital gain and social charges tax.

The notaire will charge you 69.23€ TTC for doing it.

You also have to put it on the 2042 form when you fill in your income tax form.

If you did not make a gain or there is no tax to pay (because you had property longer than 30 years for instance), there is no declaration to make.

7) The property is abroad:

If you become permanently resident in France, and then subsequently sell a property abroad, you could become liable for French capital gains tax on the sale proceeds.

Whether you are liable will depend on the terms of any double taxation treaty between France and your home country. If you are liable, you must fill in form 2048-IMM within a Month of the sale.

In the case of former residents of the UK, a tax treaty signed between France and UK, operative from 1st January 2010, makes you liable for capital gains in France on the future sale of UK properties.

You will be entitled to the same relief on French capital gains tax as you would otherwise receive if the property was located in France. On that basis you will be entitled to relief based on the duration of ownership, etc. You can also apply a tax credit equivalent to the tax you already paid in the UK (on top of the discount you already get in France). So, if the tax in the UK is higher than the one you would pay in France, no tax in France.

8) Surcharge:

Since 2013, there is a surcharge if your capital gain is above 50.000 €, only on property, not land. The higher the capital gain, the higher the surcharge (between 2 and 6%).

Conclusion:

Seek advice from a notaire if you are unsure. And there are loads of web sites that exist where you can simulate how much tax you will pay. Just type “simulateur plus value immobiliere” on google!

And please do contact me to invest any money you have left after paying that tax!

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