Selling within two years

[Mersons]

Trying to find info to help friends who want to sell their house well within two years of buying it.  Does anyone in the forum know what the law is with reference to a limit to how much profit they can make, and the possibility of previous owner claiming some of it.  They probably should consult a lawyer but I don't think they can afford that.

Thanks in advance.

Sheila

[ChezShells]

As long as its their primary residence and its not run as a business (B&B etc) then they are not liable for any taxes.

Lee

[Mersons]

Thanks Lee.  However, its not so much tax they're concerned about.  They've been told by an estate agent that they can only sell for a certain percentage over what they paid.  They've also been told that the previous owner may be able to claim some of the profit if it is over a certain percentage.  The agent had heard something about the possibility of claiming back some of their fees if they sell within these limits.  So I thought someone in here might know more about it.

Sheila

[Logan]

If the sale was a normal transaction. ie: without a lien or restriction as to sale which will be written into the deed then profit will be taxed at 33% for none residents. If the seller is a registered fiscal resident in France and the property is their principle residence then the profit is tax free after 12 months. No restrictions apply under these circumstances.

 

[Will]

If the previous owner feels he/she has been a victim of profiteering, then they can claim a share of the profits. Obviously if the house has been considerably improved, this will be taken into account. The onus is on the previous owner to show that dodgy dealings have occurred, and it would probably have to go to a tribunal. So it is no surprise that this obscure French law is rarely, if ever, invoked. I think the only time it is discussed is in the course of regular scaremongering on certain English-language web sites about various regions of France.

Plus value (capital gains tax) is at the rate of 16% for European residents, 33.3% for non-Europeans. It is payable on sale profits, after certain fees and expenses have been taken into account. French taxpayers are exempt from paying plus value on the sale of their principal residence - i.e. the address registered with the local tax office. When a French taxpayer is liable for the tax, an additinal 11% in social charges is imposed. After 5 years of ownership the tax liability reduces by 10% per annum, so that after 15 years no tax is payable. That is it in a nutshell - the full story is a bit more complex. These rules have applied since, I think, 2004 - prior to then it was as Logan (and several books) describes.

[fulcrum]

How on earth can [quote user="Mersons"]

Thanks Lee.  However, its not so much tax they're concerned about.  They've been told by an estate agent that they can only sell for a certain percentage over what they paid.  They've also been told that the previous owner may be able to claim some of the profit if it is over a certain percentage.  The agent had heard something about the possibility of claiming back some of their fees if they sell within these limits.  So I thought someone in here might know more about it.

Sheila

[/quote]

France or not. How on earth can previous owners be reimbursed for any profit made on subsequent sales. Sounds like b****x to me. If the previous owners were ripped off by the estate agents, in some way, then maybe they could have a case.

[Logan]

[quote user="Will "]

If the previous owner feels he/she has been a victim of profiteering, then they can claim a share of the profits. Obviously if the house has been considerably improved, this will be taken into account. The onus is on the previous owner to show that dodgy dealings have occurred, and it would probably have to go to a tribunal. So it is no surprise that this obscure French law is rarely, if ever, invoked. I think the only time it is discussed is in the course of regular scaremongering on certain English-language web sites about various regions of France.

Plus value (capital gains tax) is at the rate of 16% for European residents, 33.3% for non-Europeans. It is payable on sale profits, after certain fees and expenses have been taken into account. French taxpayers are exempt from paying plus value on the sale of their principal residence - i.e. the address registered with the local tax office. When a French taxpayer is liable for the tax, an additinal 11% in social charges is imposed. After 5 years of ownership the tax liability reduces by 10% per annum, so that after 15 years no tax is payable. That is it in a nutshell - the full story is a bit more complex. These rules have applied since, I think, 2004 - prior to then it was as Logan (and several books) describes.

[/quote]

Will is correct. However this may be indulging in semantics but it’s possible to be fiscally resident in France (and therefore exempt from capital gains tax) and not actually be a French tax payer for various reasons. It’s an important distinction.

The authorities used to consider a carte sejour as sufficient proof of residency in France and exemption from plus value followed with any sale. Now it is the form No 1534 renseignements sur le calcul de l’impot issued in the autumn.

 

[Deimos]

If you buy somewhere to move to and move there before having sold your house, but having put your house on the market at a realistic price (i.e. genuinely trying to sell it), are you then liable for CGT when you do sell it ?

(i.e. you decide to move, find a place before yours has sold and decide to move anyway whilst still trying to sell yours - thus the old property you then sell is not your primary residence).

Ian

[Nick Trollope]

[quote user="Deimos"]If you buy somewhere to move to and move there before having sold your house, but having put your house on the market at a realistic price (i.e. genuinely trying to sell it), are you then liable for CGT when you do sell it ? (i.e. you decide to move, find a place before yours has sold and decide to move anyway whilst still trying to sell yours - thus the old property you then sell is not your primary residence). Ian[/quote]

True, but the rules take this into account. Ie. no CGT payable. This approach is normal in France.

Just to comment on Will & Logans's point, this (vendor claiming part of the profit) point is not as rare as you may think. It is usually picked up by a Notaire (who is responsible for such things) and does not require an order from a Court. BUT, the original Vendor will need to prove that your profit is excessive - subjective, but it is the Notaires descision.

 

[Benjamin]

There is, possibly, a very sceptical scenario that could be unfolding for your friends.

Estate Agent loosely tries to explain what could happen under French law and advises your friends that, to avoid any possible repercussions, they should allow him to market the property at the price they paid for it plus a reasonable percentage that would avoid your friends having to pay over some of the profit to the previous owner.

Result - house goes on the market at less than current market value and sells very quickly.

Agent trousers his commission and receives only a bit less than he would have done if it had sold for the true market value.

Only a thought.

Benjamin

[Sunday Driver]

[quote user="Benjamin"]
Only a thought.
[/quote]

You took the thoughts right out of my mouth.....[;-)]

 

 

[TarnGranny]

Deimos, until you change addresses for tax purposes your old house can still be your main residence. I.e. your new house can be your Maison Secondaire until the old one is sold.

[sunnyd]

[quote user="Benjamin"]There is, possibly, a very sceptical scenario that could be unfolding for your friends.

Estate Agent loosely tries to explain what could happen under French law and advises your friends that, to avoid any possible repercussions, they should allow him to market the property at the price they paid for it plus a reasonable percentage that would avoid your friends having to pay over some of the profit to the previous owner.

Result - house goes on the market at less than current market value and sells very quickly.

Agent trousers his commission and receives only a bit less than he would have done if it had sold for the true market value.

Only a thought.


Benjamin
[/quote]

 

I had this happen in the last month. The agent that sold us the property was asked to mandate it for its sale again, they said that it was worth the same as we paid for it (without leaving their desk or mention the price scenario), simply said that property prices had not moved in the area. Yet, two seperate valuations showed us that the property is now worth 110,000 Euros more than we originally paid. We knew it was a bargain when we bought it but the difference is remarkable. We moved into the house 1 year ago but signed the compromise 2 years ago November coming. Hopefully when a buyer is found, the Notaire will take into account that the compromise was actually signed (therefore the property sold) 2 years ago November coming. We have done no renovations to the property except re decorate and clean it, properly

How can it be deemed that a sort of foul play has been comitted by the current owner as to the price paid, surely the dispute should be with the agents that must have valued it well below market value originally.

Are there any other implications to this scenario that we as sellers cannot see? What if the seller wanted to sell the property under a certain value for their own tax reasons? (would they then still be willing to claim "lesion", I doubt it).

So, it begs that the scenario above could indeed be in force.

[Logan]

Do not put any trust in French estate agents valuations. They are notorious in undervaluing property just for a quick sale. Their 'raison-d’être' is commissions and more commissions. The cheaper the property the quicker the sale.

Value the property yourself by studying the asking prices in local markets, local papers and the Notary's publicity. Do your own research if you are a seller or buyer. Trust no professional body where their interests conflict with your own.