What taxes do you pay in France on any gain realised from the sale of your French Property?


One rarely thinks about the future sale of a property when acquiring it. Nevertheless, the tax treatment of any future gain arising on disposal may be heavily reliant on the trail of evidence accumulated over the years of ownership and available at the time of sale.

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For instance there is no point in claiming for French principal private residence exemption if the taxpayer cannot provide full French resident income tax returns or assessments, or in claiming for expenses which are not supported by invoices. Sales can sadly result in unexpected tax bills through a lack of consideration to the factors required to secure optimum tax treatment.

The French authority may re-assess up to the end of the third year following the sale. They may thus reject an exemption or deduction retrospectively if, on the face of a routine review, they suspect foul play and are not satisfied with the evidence provided.

Below is a summary of French capital gains Tax (CGT) rules both for French residents and non French residents.

Main Home

As in the UK, a French resident selling his main home will benefit from the principal private residence exemption. The rule of thumb is that taxpayers may have vacated their home for up to one year and still benefit from the exemption. Nevertheless the administration will tolerate a longer delay if the taxpayer can demonstrate that despite his best efforts it took longer to achieve a sale. If you end up selling your former French home after a permanent departure from France you will be subject to the non-French resident rules described below.

Selling a Second Home as a French Resident

Up until 2010, a gain on a second home owned for over 15 years was totally exempt from French CGT through the application of a 10% taper relief. This relief kicks in after five full years of ownership; so, after six years of ownership, the taxable gain is reduced by 10% annually.

The capital gains tax charge is made out of two different rates: the basic 19% rate and a total of 12.3% social surcharges to include the CSG, CRDS and PS. From 2011, the extra 12.3% charge applies before any taper relief. As a result, French CGT is effectively charged at a minimum rate of 12.3% on the full gain.

The taxable gain is calculated as the difference between the purchase price of the property and the sale price. There is a standard allowance of 7.5% of the purchase price in respect of acquisition costs and a further 15% provided the property was held for at least five years, to cover general improvements. If the effective costs are higher it is possible to itemise these but only in respect of acquisition costs, construction, reconstruction, extension and improvements as opposed to the replacement of any existing items. Invoices are required as evidence. These should be made out to the owners and originate from registered building firms and artisans. Finally, there is a reduction of €1,000 per owner from the taxable gain.

Selling a French Property as a Resident Outside France

Non residents of France are not subject to the social surcharges of 12.3%. Therefore they are unaffected by the recent change in the regime (see above). The gain is computed using the same rules and taper relief as those described above. There will effectively be no taxable gain after fifteen years of ownership but the non-resident may well face a liability to tax in their country of residence. Non-residents must appoint an accredited fiscal representative in France to deal with their CGT declaration and computation unless the sale price is below €150,000.

The basic CGT rate varies depending on where the vendor is resident at the time of the disposal: 19% for EEA residents or 33.3% otherwise. The rate for gains realised by property-traders is 33.3% but it may be as high as 50% if the property-trader is resident of territories classed as harmful tax havens.

EU nationals, who were formerly French residents at some stage in the past, may benefit from a capital gains tax exemption on the sale of one French property. For this, they must be able to prove that they were resident in France for at least two full tax years and that their French property was vacant as at 1 January of the year preceding the year when the sale took place. The fiscal representative is still required in this context to ensure that exemption criteria are fully met.

For further information, a review of your French tax affairs or assistance with your French tax returns, please contact Virginie Deflassieux or Catherine Le Pelley at french.tax@pkfguernsey.com or visit www.pkfguernsey.com. A complete French tax guide “Taxation in France, a Foreign Perspective” is available on this website.

Taxation in France

Taxation in FranceVirginie has also published an indispensable guide for anyone considering a move to, or an investment in France. The book provides an overview of the French tax system, explaining the terms used and giving advice on residence issues and conflicts. An analytical guide to the main French taxes. Practical advice on retiring to France and estate planning.
Use the link below to find out more or to purchase the book from Amazon:
Taxation in France: A Foreign Perspective




Disclaimer: The information contained in this article is offered as a basis for further consideration only and is not to be acted upon without independent professional advice based on the actual circumstances of the taxpayer. Neither the author or PKF (Guernsey) Limited can accept any responsibility for any loss occasioned to any person no matter howsoever caused or arising as a result of or in consequence of action taken or refrained from in reliance to the contents of this article.

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What taxes do you pay in France on any gain realised from the sale of your French Property?
One rarely thinks about the future sale of a property when acquiring it. Nevertheless, the tax treatment of any future gain arising on disposal may be heavily reliant on...

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