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French Capital Gains Tax and social contributions

When selling a property in France, you may be liable to French Capital Gains Tax regardless of whether you are a resident or non-resident. However, if you are resident in France, you will be liable to pay Capital Gains Tax on any property you sell, be it in France, the UK or elsewhere.

How is Capital Gain calculated?

Essentially, a capital gain is the benefit you made between your purchase price and the sale price. It is calculated by subtracting the purchase price plus deductions from the sale price.

However, there are a few disbursements that you can deduct from this amount:

  • Disbursements to sell the property: search surveys done (diagnostics) and estate agent commission.
  • Disbursements to buy the property: estate agent’s commission, taxes paid on purchase (real amount paid or flat rate of 7.5% of the purchase price)
  • Works completed on the property: if you have had works completed on the property, some of them may be deductible for their full amount. If you have owned the property for more than five years, you can also choose to apply a flat rate of 15% of the purchase price).

Capital Gains Tax is divided in two different taxes - a fixed rate of income tax at 19% and social contributions amounting to 17.2%, thus giving a total tax rate of 36.2%.

In addition to the basic rates of capital gains tax, a supplementary rate of tax is also payable on large gains (above 50,000.00€). There are different rates, between 2% and 6% on top of the regular rates.

Taper relief system

To reduce the amount of tax payable, the French government has organised a taper relief system based on how long you have owned the property.

From the sixth year of ownership, the taper relief system will progressively reduce the taxable amount. The 19% fixed rate will cease to apply after 22 years of ownership and the social contributions of 17.2% will end after 30 years. This means that, regardless of your capital gain sum, you will be exempt from Capital Gains Tax after 30 years of ownership.

Exemptions

If the property you are selling is your main home at the date of the sale, it can be exempt from Capital Gains Tax in France. However, this will only be available if you are registered into the French tax system. If you have already left France before the sale, you could still benefit from this exemption, providing that property is sold within two years of your departure and that the property was on the market during this time. Depending on your specific situation, we can tell you if you are entitled to the exemption.

When selling a property in France while resident in the UK, you will also be liable for UK Capital Gains Tax. However, there is a double tax treaty in place to prevent any double taxation for the same capital gain. According to this treaty, you must still declare the sale and the capital gains to HMRC but you can get tax credit for the tax that you have paid in France. However, this credit is only available for the income tax part (19%) of the French capital gains tax and does not apply to the social charges.

When the time comes to complete on your sale, we will calculate your potential liability and explain the exemptions and process to have it credited against your UK Capital Gains Tax. For more information, please contact our French team.