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Buying a renovation Project!


nikki
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We are interested in buying a renovation project as our second home. But if we decide that we want to sell when ever we want to do we have to pay the previous owners profit as well as capital gains tax which i understand is 15%.  I read an article that a lady bought a house kept it for about 18 months and then wanted to sell because she needed a bigger property.  I think the lady had to give the previous owners a percentage of her profit. Can any one help me with this.

Thanks

 

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Well I have never heard of paying the previous owner anything from the sale of a property he has already profitted on before. The CGT rule applies if you sell a second home within 15 years of purchase by a sliding scale ( 18months would probably qualify for the full 33.3%). You can only offset charges by producting french registered artisan's TVA invoices for any work or services you have had carried out - certainly no till receipts or your own estimations for DIY. I suggest you take advice from a french notaire on how a sale like this could affect you as it may pay to hold onto the property for a few more years and decrease the tax payable which is taken at souce when you sell. Remember a renovation project will be expensive depending on the amount of work involved and sometimes a new build or a slightly more expensive property in the beginning but with less to be spent on it can be better.
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I work in an estate agents so I know!!! I believe the law is the same in the UK.

You pay capital gains on the profit that you make on any second home, minus the agency and notaires fees, and minus 1000 euros that the French government "lets you off", than you pay 15% on the profit, this starts to go down on a sliding scale after 5 years, and nothing after 15 years! Voila!

Nobody pays capital gains on a primary residence.

Any questions feel free to get in touch!

 

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Mrs Conq works in an estate agents too. And as a former trainer for the UK tax people (specialising in capital gains) she will tell you that the French and British systems are totally different.

There is a law in France designed to prevent profiteering from property speculation that allows the seller to claim a share of profits if a house is sold after a certain time for substantially more than was paid for it. It's seldom invoked, and damned difficult to prove if improvements have been made or the general market is rising sharply (which at the moment it is not); but the law does exist.

You will pay capital gains on your principal residence in France if you have not filed French income tax returns from that address. That brings a lot of British people into the net - some of those who have sold up within a couple of years of moving over as well as those who have never bothered to get into the French systems.

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The laws that are in place are there for a reason,and the point is that the laws are french laws and should and in my opinion must be taken into account when buying in France.We have two houses in France and can not live in both of them???BUT we took that into account and knew what it was all about,a little bit of time spent finding out which way to go saves a lot of pain in the long run.
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In all the completions I have attended for the sale of principal residences, I have only ever seen the notaire ask for evidence of taxe d'habitation, and a declaration on trust that it is the vendors primary residence. Never have they asked for income tax returns, perhaps this is a law that is seldom invoked too? What do you think?
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Yes, as I understand it, if you sell a property within 2 years and the profit you make is more than 7 twelths of the original price you have to pay the previous owner a percentage of that profit (?50%?). We heard of a case via a local immobilier where he had to advise the sellers of a house to wait a few months before putting their house on the market so as to avoid paying out to the previous owner. Apparently they made quite a profit on the house so were liable.
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