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Capital Gains Tax


thehepples
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Hello everyone.  Wracking my brains on this and I seem to be going around in circles.  We have a maison secondaire near Bordeaux.  We are UK residents.  We are considering selling the Bordeaux house and buying one on the Med side of France - nearer to beaches and warmer mostly

We bought in 2003 so have had the house just over 10 years.  The house cost 36000 Euros and was a wreck.  No bathrooms, no inside loo, no kitchen, no fires, no heating, soil floors.  Walls falling down.  I have receipts for every thing we bought to make the house liveable EXCEPT from the British builders who installed the fosse and did the heavy work who shortly after they finished disappeared off the face of the planet apparently.  No problems with their work.  Just can't prove what I spent!

Now if I have this right:

CGT is charged at 19% of the gain

Gain is Selling value - (Original value+cost of selling+cost of allowable renovations+  Anything else anyone knows about???)

I get a 5% reduction on CGT for each year we have owned the house after year 2 = 40% if I sold this year (assuming we are still on 22 years for full exemption)

In addition I will have to pay a 13.5% Social tax.  What I can't fathom is what value this is paid on.  Is it charged on the Selling value or the CGT amount or what other figure plucked out of the air??

Has anyone a link to a list of what ARE acceptable renovation costs, please.

It probably won't be this year

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Have a look at this thread:

http://services.completefrance.com/forums/completefrance/cs/forums/2990226/ShowPost.aspx

Allowable costs are for improvements rather than maintenance.

Bear in mind that in the calculation for the UK capital gains tax (to which you will be subject as well, with allowances for French tax paid), the purchase price and costs need to be converted into sterling at the historic exchange rates that applied on the dates that they were incurred.

There are links in the thread to on-line simulators for the French tax.

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I thought that it was only receipts for work carried out by registered French artisans that are accepted as allowable expenses - not materials for DIY. But I also thought there was a fixed allowance that you can claim as an alternative to submitting actual figures if it works out to your advantage, sounds like that would be your best bet. Simpler, too.
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Didn't the foreigner tax get scrapped??  http://www.frenchpropertylinks.com/french-property-sales/french-holiday-home-tax.html

"From the web page given, my highlighting

Second home, second Taxe Foncière

The new tax was to have worked like this:

Already burdened by the normal property owner's tax Foncière, and the

residents' tax d'Habitation, second home owners from outside France

would have faced another tax, something akin to an additional Foncière.

If this had been approved, as Sarkozy wished, the rate of 20% (on the

cadastral value) was to apply. The law would have become effective in

2012.

Victory for the dissenters

However, Sarkozy and his

government came up against a powerful opposition to the plan. During a

meeting, held on June 18th (2011), the French president was forced to

shelve the plan for the new tax
. No less than nine senators, all of whom

represented French non residents, voiced their dissatisfaction with the

bill, and applied pressure to prevent it coming into force. They also

had on their side a question regarding EU Law, which raised the issue of

discrimination between residents and non residents, also contrary to

the dictates of the French constitution, known for its commitment to

equality." 

Has it been reversed again???

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[quote user="Pickles"]Have a look at this thread:

http://services.completefrance.com/forums/completefrance/cs/forums/2990226/ShowPost.aspx

Allowable costs are for improvements rather than maintenance.

Bear in mind that in the calculation for the UK capital gains tax (to which you will be subject as well, with allowances for French tax paid), the purchase price and costs need to be converted into sterling at the historic exchange rates that applied on the dates that they were incurred.

There are links in the thread to on-line simulators for the French tax.

[/quote]

Thanks for the link, Pickles.  I had done a whole forum search for Capital Gains Tax and only an old thread in this "Legal Issues" section showed up.  The receipts are definitely not for maintenance.  The house was a shell full of rubbish.  The benne rental alone to clear the junk came to nearly 5K Eur!!!.  We had to get special permission to install a septic tank as the garden is small and we would have broken all the rules about postion relative to walls, wells and boundaries.  But as the nice lady said at the time, houses need toilets!  The simulators work well and the gain won't take us outside our combined UK yearly allowance.  Just out of interest, how does HMRC know I have a house in France if I've never told them?? We don't let it out - I'm fussy about who sleeps in my bed - just like Mother Bear - so there's never been an income from it to declare.

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You can claim a flat 15% allowance without receipts. The notaire won't accept receipts for any building materials that you bought yourself. So if you have receipts from registered artisans for work totalling more than 15% of the profit you can submit those, otherwise you just claim the 15% allowance.

"Tout d’abord, seuls les travaux réalisés par une entreprise sont pris en compte dans le calcul. "Autrement dit, tous les chantiers que les propriétaires ont entrepris eux-mêmes ainsi que le coût des matériaux achetés ne sont pas éligibles "

http://www.capital.fr/immobilier/actualites/plus-values-immobilieres-ces-travaux-qui-vous-permettent-de-reduire-la-facture-843359

The UK knows which UK taxpayers own houses in France because the UK and French tax offices share information.
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[quote user="thehepples"]Didn't the foreigner tax get scrapped??  http://www.frenchpropertylinks.com/french-property-sales/french-holiday-home-tax.html

Has it been reversed again???[/quote]

There is another "foreigner tax" - the requirement to use a "fiscal representative" whose job in theory is to underwrite any shortfall in tax owed, and who in reality charges 1% of the purchase price for doing nothing.

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Well I can only hope that he does respond to the message I've sent on facebook.

However, we bought what was basically about to be demolished and we have turned it in to what is now probably worth 200K.  Did I read somewhere that under these circumstances a special valuer or estimator can come out to basically asses the work that has been done and put a value on the renovations?  It might have been one of George East's books. 

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My impression is that the government isn't very sympathetic to how much you invested if you did the work yourself, and it's not going to go out of its way to help you to reduce the amount of tax it can collect from you. The reason they only accept artisan receipts is to give people an incentive to use registered artisans because that puts money into the economy. Every time you pay an artisan's bill the govt gets its percentage, via the artisan's taxes and cotisations. If you don't pay anyone to do the work the govt gets nothing out of it - until you sell.

If you haven't got artisan receipts, what about decennale insurance? One way and another, DIY renovating and selling is a bit at odds with the system these days.

Maybe I'm being over cynical but that's how it seems to me, but good luck with it.
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http://www.pap.fr/argent/calculettes/calcul-plus-value-immobiliere

Is a very easy to use calculator.

Unlike many similar aids you can actually see the details of the calculations.

If you haven't got artisans bills for any of the work, you could easily be looking at a tax bill of 35,000 Euros
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Decennale insurance - French law specifies what insurance has to be in force for the various categories of construction work. Major work, such as roofing or plumbing installations, should by law be covered by a 10 year 'decennale' guarantee and assurance dommage-ouvrages. All artisans who carry out this type of work must by law subscribe to an insurance policy that provides these guarantees on all work done by them and paid for in full by the client. When a property is sold, if major work has been carried out recently, the purchaser (unless you sell to a Brit who doesn't know anything about it) will expect this guarantee and the peace of mind that it brings. A good notaire will check that there is a decennale guarantee on it before the sale goes through. If you have carried out major structural work yourself (roofing etc) it is in your own interests that a special clause is inserted in the contract and signed by the purchase to state that they are aware there is no decennale insurance, and that they will not hold you responsible for any problems that may arise with the work. This may mean you have to bring the price down but it is important to cover your back, because if the buyer does not sign this clause, it is assumed that the work is guaranteed (because by law it has to be). As the seller, in the absence of any decennale insurance you would be legally liable for the cost of any repairs that become necessary, unless it's written in to the contract that the purchaser waives their right.

Watch your back if you have done any roofing work because French buyers know their rights and if they do find leaks or anything they will put in a claim as a matter of course.
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If the house was a near total rebuild, a French buyer is likely to ask for proof that you took out the "Assurance Dommages-Ouvrage". They may use the absence of this as a further negotiating tool.

see

http://www.french-property.com/guides/france/building/new-build/defect-guarantee/householder/

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