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Another Capital Gains Tax Question


Pixie Toadstool
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My husband and I are retiring to France very soon to live in our house in Normandie which we have had for 10 years.  However, we hope to move to the Languedoc and we want to avoid paying capital gains tax on our French house when we sell it, so can anyone help here please?  Our solicitor was unable to help us with this and so I thought I'd plumb the many brain cells on the forum in the hope of getting some answers to allow us to plan the next stage of our lives.

  • How long do we need to live in our French house to be considered tax resident so that when we sell our Normandie home we don't have to pay capital gains?  We plan to tell the Mairie as soon as we arrive that we are living in France permanently from now on and of course will notify the UK Government before we go.

  • I realise that we would get reductions in French capital gains tax were we to sell mmediately as we have owned the house for 10 years but we don't have many of the bills to show how much we have spent on improving the house and as it is probably worth more than 100,000 now and we only bought for 35k 10 years ago we would probably still need to pay several thousand euros to the French authorities as a capital gain until it is considered as our principle residence.
  • Am I correct in the above assumptions please and does anyone know of any way round this issue to avoid paying lots of money but to move sooner rather than later.
Thanks in anticipation![blink]

Pix

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You are fiscally resident in France from the day you arrive to live here permanently.

The next question is slightly trickier to answer.  If you do buy another house (if I've understood correctly), you can still designate the Normandy house as your principal residence (as long as you don't let it in the meantime).

I believe that you have up to 2 years to keep 2 houses before CGT is applied.

Someone on here will correct me pretty quickly if I've got the second bit wrong.

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The answer to your first question is that there is no fixed period. If you have been there long enough to have made a tax return from that address, then principal residence is firmly established. However, there are other ways of proving main residence, such as being affiliated to the social security system, being in employment or self-employment based at that address etc. According to this site, eight months is often taken as a rule-of-thumb for minimum residence, but it's basically up to the notaire and the tax office.

Once you have owned the house for five years, your liability decreases by 10% for each subsequent year. So having owned the house for 10 full years your liability to plus values would be halved. Moreover, after five full years of ownership you can apply a 15% discount to cover improvements etc whether or not you have valid bills.

As S17 says, you currently have up to two years between selling one house and buying another before plus values become payable on the first, as long as you don't rent it out or let somebody else live there, but the site linked above suggests this could be reduced to one year in the near future.

Although when moving within France we had only been in permanent occupation of our house, previously a holiday home, for a comparatively short time, there was never any question of paying capital gains. This was because we were moving closer to the workplace.

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Hi,

     I get the impression that you would not be moving out of the house before selling it . In theory you have only to live in the house as principal residence for 1 day to avoid french CGT (previously it was 2years), but you would be wise to do everything possible to establish french fiscal residence as soon as possible . Get and complete the HMRC form P85 before you leave the UK and also obtain from them a form "France Individual", which you should submit with your first french tax declaration. Another way to establish residence is to submit a request for a "temporary carte de sejour" to your prefecture (via your mairie) --the mairie may well tell you this is not necessary ,but you are entitled to ask for it --you should insist , and then even if the prefecture (as is likely) refuses to issue one, it is on record that you fulfilled the residence criteria on the date you applied.

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Hi there, as everyone has said: you don't pay capital gains tax on your principle residence, however, to be a principle residence you have to have proof that you have lived there: as someone pointed out: be a part of the social security system or be registered to pay taxes. The good news is that, your second home, isn't liable for capital gains tax, after 15 years. If you have owned it for 10 years, your capital gains tax (of around 30%) is reduced by 50%. In another 5 years you won't pay anything. This applies even if you have rented out your property and made financial gain.

Good luck with your retirement.
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[quote user="Will"]
Although when moving within France we had only been in permanent occupation of our house, previously a holiday home, for a comparatively short time, there was never any question of paying capital gains. This was because we were moving closer to the workplace.

[/quote]

But I assume that if one is "forced" to move for work (or other) reasons, one still has to pay taxes on buying another house, or is there any relief for these?

We would dearly love to move to another house in our village with even a small garden, and no stairs, as we have only a street outside, and stairs may soon be too difficult, but the thought of paying over 2 years income for the privilege is enough to keep us where we are.

 

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