Information on Capital Gains Tax for Expats in France Suzanne Pearce gives us an insight into the way this tax works if we want to sell a French property.
Is it complicated?
This depends whether you are resident or non-resident. François Hollande has changed the rules so that non-resident EU citizens are now paying the same as the French second home owners. This extra charge is to cover social charges (15.5%) although if you are not French or living in France it is difficult to justify why you should pay taxes for services that you will not benefit from – it may well be that we have not heard the end of this and I would anticipate seeing a case brought before the European Commission.
Is it only on a house that is not your main home?
It is. If you are fiscally resident in France for tax purposes and you can prove that you have been for preferably at least 2 years then you should be fine. Don't forget that the Capital Gains Tax is payable only on the gain on property and other assets.
How is it calculated?
Up until February 2012 the taper relief applied to your Capital Gains Tax liability meant that you had nothing to pay after 15 years of ownership. This is now 30 years. You can offset the difference between your initial purchase price including all fees and your net sale price (net vendeur), your diagnostic fees, géomètre fees, etc. and some allowable receipts for works carried out to the property by a French registered Artisan.
Are retirees being put off buying because of these changes?
It depends whether it is going to be a main residence or holiday home. The property market is not
the same in France as it is in the UK and there is likely to be less profit over the short term. Capital Gains Tax is only paid on the gain. If you are going to renovate your property to increase the value remember to use French registered Artisans and let them buy the materials for the job otherwise you will not be able to offset the costs.
How is the country of residence determined?
A French fiscal resident is defined in the French tax code as someone -
• Who has a home in France (not a secondary residence), or
• Who spends most of the French tax year in France (more than 183 days), or
• Who has his centre of economic interest in France, or
• Who runs a business from France
I encourage clients to go in to the Hôtel des Impôts and make a declaration of residency and declare their income. Even if the income and tax are paid in the UK. That way you legally establish yourself fiscally in France which will involve many problems with Capital Gains Tax later on.
These regulations will presumably all be in French?
Yes – a good Estate Agent (Immobilier) should be able to explain Capital Gains Tax regulations to you and give you an idea of how much you are likely to have to pay. The Notaire will act as tax collector on completion of the sale and any taxes they consider due will be deducted before you get your money. If your sale price is under 150,000€ net vendeur the Notaire will do the calculation. If you are selling your second home for over 150,000€ there is a Government department called the SARF who will calculate your liability. They will also underwrite any subsequent losses to the French government if there are any discrepancies. There is a fee for this of 1% of your selling price. It is something that you need to be aware of before you agree to sell.
I imagine that people who have had their property in France for a long time will have seen a big increase in the value?
Certainly those who bought before 2000 will see an increase in value. Also the regulations in relation to Capital Gains Tax have changed – up until January 2007 for example you were able to offset the cost of materials and labour that you had provided for your property. Now you can only offset those that you have been invoiced for by a French registered Artisan.
For now – keep all of your receipts relating to expenses on your property.
For more information on Capital Gains Tax and for a leaflet, in English, that I have produced on the subject please contact me by email : email@example.com
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