Jump to content

Capital Gains Tax for former residents.


oakbri
 Share

Recommended Posts


I bought my house in
France in 2002 and lived, worked and paid tax there. I then moved to the middle east at the beginning of this year and my family joined me at the start of April. When my family moved over I informed our mayor and he gave me a letter to give to the tax people to show we were leaving France.

We are now putting our house on the market and I am trying to understand the implications of CGT.

The house is the only house I own, I have paid income tax in France as well as the tax d'H and tax fonciere.

I thought I was starting to understand everything until I came across this article.

 

 "11.1.3. Former Residents of France

No capital gains is payable on a property owned by a non-resident of France, provided you can demonstrate that you have been previously fiscally resident in France for a continuous period of at least two years.

 It does not matter whether or not this residence qualification directly proceeded the period before the sale.

 This is a provision in the law that has been created primarily for French residents who retire abroad, but it equally applies to international buyers who decide to return home.

 The best form of evidence for demonstrating your prior residence is through tax returns submitted in France from the address of the property.

 The non-resident must be a member of the EU or living in a country that has signed an appropriate tax treaty with France.

 This concession is limited to the sale of only one property in any five year period and on condition that it is your only property in France at the time of the sale.

 Needless to say, this rule does not exonerate the vendor from potential liability to capital gains tax in their actual country of residence!

 If you do not meet the two year rule, you are liable to capital gains tax on the usual terms."

 

As I said, the house is the only one I own, anywhere, and until April was our only residence. We now live in a rented house in Bahrain.

I am British, but now live in Bahrain which I understand has a tax treaty with France, although I don't know if it is an 'appropriate' one.

So, is the article correct that as a former resident of France, for more than 2 years, I don't have to pay CGT. Other posts seem to contradict this.

Many thanks in advance.

Link to comment
Share on other sites

Simplest way is to look at what it actually says in the code general des impots:

Art 150U

I.-Sous réserve des dispositions propres aux bénéfices industriels et commerciaux, aux bénéfices agricoles et aux bénéfices non commerciaux, les plus-values réalisées par les personnes physiques ou les sociétés ou groupements qui relèvent des articles 8 à 8 ter, lors de la cession à titre onéreux de biens immobiliers bâtis ou non bâtis ou de droits relatifs à ces biens, sont passibles de l'impôt sur le revenu dans les conditions prévues aux articles 150 V à 150 VH.

Ces dispositions s'appliquent, sous réserve de celles prévues au 3° du I de l'article 35, aux plus-values réalisées lors de la cession d'un terrain divisé en lots destinés à être construits.

II.-Les dispositions du I ne s'appliquent pas aux immeubles, aux parties d'immeubles ou aux droits relatifs à ces biens :

1° Qui constituent la résidence principale du cédant au jour de la cession ;

2° Qui constituent l'habitation en France des personnes physiques, non résidentes en France, ressortissantes d'un Etat membre de la Communauté européenne, ou d'un autre Etat partie à l'accord sur l'Espace économique européen ayant conclu avec la France une convention fiscale qui contient une clause d'assistance administrative en vue de lutter contre la fraude ou l'évasion fiscale, dans la limite, par contribuable, des deux premières cessions, à la double condition que le cédant ait été fiscalement domicilié en France de manière continue pendant au moins deux ans à un moment quelconque antérieurement à la cession et qu'il ait la libre disposition du bien au moins depuis le 1er janvier de l'année précédant celle de cette cession. En outre, la seconde cession bénéficie de ces dispositions à la double condition que le contribuable ne dispose pas d'une autre propriété en France au jour de cette cession et qu'elle intervienne au moins cinq ans après la première ;

Accordingly, if you meet the conditions set out in section 2, then you will be exempt from CGT on the sale of the property.

 

 

Link to comment
Share on other sites

Hi,

    As Bahrain and France signed a new DT treaty on 12/05/09,and an anti- fraud information exchange protocol on 07/05/09, it would seem that you are covered .

Even if you were not covered this way, as it was your principal residence, you would still have been free of CGT if you sell within 2 years.

Link to comment
Share on other sites

Many thanks Sunday Driver

From my quickly diminishing French that looks like the article I read was an English translation of the code des impots. If I am not mistaken I should then be not liable provided the treaty with Bahrain has the correct clauses in it. I know Bahrain has signed a recent tax treaty with France in accordance with all OECD regulations, so I am quietly confident.

Once again many thanks

 

Link to comment
Share on other sites

Hi Parsnips

Many thanks. I did a search on tax treaties and found, as you said, a new one was recently signed.

I woke up this morning convinced I would be handing over even more of my hard earned cash to Monsieur Le Taxman, but now I think I need to open a bottle of red and celebrate.

Many thanks for your reply

 

 

Link to comment
Share on other sites

I don't want to be a party pooper here, but the French text doesn't say "signed a treaty", it says "concluded a treaty", and although other interpretations are possible, I'd say a tax treaty wasn't concluded until it is ratified by both countries (the fact that it comes into force later probably isn't important in this context as you're not relying on the treaty to protect you, but French law instead).  I have no idea whether the Bahrein treaty is yet ratified but it might be worth checking up on this before actually selling the house.

A previous tax treaty between the UK and France was signed by both countries but never ratified, and it never came into force at all: it has been replaced by a new treaty instead.

Link to comment
Share on other sites

Araucaria

Many thanks for the advice. I will give the Embassy here a call on monday and see if they can tell me. As you say, it might be worth holding it off the market a few months if the treaty is not yet ratified.

Link to comment
Share on other sites

Hi Parsnips

Yes it was my principle residence. So does that mean I have 2 years to sell from the date the Mayor declared me as having left, and still be exempt from CGT, no matter where in the world I moved to?

Once again many thanks for all the replies.
Link to comment
Share on other sites

[quote user="oakbri"]Hi Parsnips

Yes it was my principle residence. So does that mean I have 2 years to sell from the date the Mayor declared me as having left, and still be exempt from CGT, no matter where in the world I moved to?

Once again many thanks for all the replies.[/quote]

Hi,

      As far as as I know you have 2 years from the time the property is first put on the market(keep evidence)---provided it is not rented out at any time. You should be exempt from FRENCH CGT , I cannot answer for any other countries.

Link to comment
Share on other sites

The capital gains tax exemption set out in Art 150U is conditional upon you being resident in the property as at the date of sale so it would normally exclude a property which had become vacant because you bought another house and moved in the meantime.

The tax office recognise this situation and have issued an information bulletin setting out the notion of a normal delay in a sale.  The key points are:

3. Cela étant, lorsque l’immeuble a été occupé par le cédant jusqu’à sa mise en vente, l’exonération reste acquise si la cession intervient dans des délais normaux et sous réserve que le logement n’ait pas, pendant cette période, été donné en location ou occupé gratuitement par des membres de la famille du propriétaire ou des tiers.

4. Aucun délai maximum pour la réalisation de la cession ne peut être fixé a priori. Il convient donc sur ce point de faire une appréciation circonstanciée de chaque situation, y compris au vu des raisons conjoncturelles qui peuvent retarder la vente, pour déterminer si le délai de vente peut ou non être considéré comme normal.

Dans un contexte économique normal, un délai d'une année constitue en principe le délai maximal. Cependant, l’appréciation du délai normal de vente est une question de fait qui s’apprécie au regard de l'ensemble des circonstances de l'opération, notamment des conditions locales du marché immobilier, du prix demandé, des caractéristiques particulières du bien cédé et des diligences effectuées par le contribuable pour la mise en vente de ce bien (annonces dans la presse, démarches auprès d'agences immobilières, etc.).

 

 

Link to comment
Share on other sites

Sunday Driver

I am a bit confused. I haven't bought another house yet. However I am in rented accommodation since April. I understand you need to sell the house within 2 years ( a friend of mine just put his house on the market in the same village and it sold in 3 days, so I am hopeful the market is improving a little) However, although all our possessions and furniture remain in the house, we are overseas. Does this mean we will have to pay CGT. Or as we are living in a country with a tax treaty (still don't know if it is ratified) are we exempt anyway?

Sorry to keep asking questions but I can't get it clear in my head.

Many thanks
Link to comment
Share on other sites

Oakbri

The two year delay relating to the sale of one's principal residence is really a side issue that has beeen introduced into this discussion and doesn't apply to you because:

- you are currently not resident in France;

- you are a national of an EU member state (where you are actually living is immaterial);

- you were tax resident here for at least two consecutive years during the time you lived here;

- the property will have been available on 1 January of the year preceeding the sale;

You therefore meet the criteria for exemption under Art 150U II (2).

 

Link to comment
Share on other sites

"....nationals of a Member State of the European Community or another State party to the Agreement on the European Economic Area which has concluded with the France a tax treaty containing a clause on administrative assistance in the fight against fraud and tax evasion...."

This key condition only refers to nationality, not where the individual is living.  On that basis, the existance and validity of a France/Bahrain treaty would seem to be irrelevant.

Oakbri is a UK national, the UK has concluded the necessary tax treaty with France, so he meets the condition....[;-)]

 

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...