Colandhelinfrance Posted April 24, 2007 Share Posted April 24, 2007 Hello folks,Can anybody tell me if they have any knowledge on the tax laws when selling your house in France please?I have heard that it all depends on how long you have owned the house for etc. Link to comment Share on other sites More sharing options...
Pickles Posted April 24, 2007 Share Posted April 24, 2007 [quote user="Colandhelinfrance"]Hello folks,Can anybody tell me if they have any knowledge on the tax laws when selling your house in France please?I have heard that it all depends on how long you have owned the house for etc.[/quote]I presume that you are referring to capital gains tax (taxe/impot sur plus-value), which has been done to death - and beyond - in very recent postings.The capitalgains tax position of a person who is French resident is that they haveno tax to pay on the capital gain realised on the sale of theirprincipal (habitual) residence. However, if you are non-resident in France or have not beenresident in France for 2 years, there IS capitalgains tax to pay and this is at 16% of the gain afterallowances for an EU citizen, and 33% for a non-EU citizen. Also, a person (whereever resident) selling property which is not his/her principal residence paysthe same 16% capital gains tax on the profit after allowances. If they are French resident they will also pay 11%social charges on the gain.Hence for a property that is NOT your primary residence (whether you are UK or French resident), to calculate the gain, you start with the sale price net vendor and deduct the initial purchase price including purchase costs, the value of any improvement works done to the property for which you have valid receipts and the disposal costs. There is then a form of taper relief so that for every additional year after 5 years of ownership the taxable gain is reduced by 10% until after 15 years of ownership there is no capital gains tax to pay in France. You simply multiply the gain after allowances and taper relief by 16% (note that if you are French resident you will also have to pay social charges of 11% on the gain after allowances)If you are UK resident and domiciled then you will also have to declare the sale to HMRC and pay CGT on the gain after allowances - in the UK taper relief kicks in in year 3 of ownership but reduces the taxable amount by only 5% per year until reaching a maximum reduction of the taxable amount of 40% after year 10. Hence after year 10 in the UK you would pay CGT charged at your maximum imposable rate calculated on 60% of the gain after allowances. Any French capital gains tax paid can be offeset against your UK capital gains tax liability.If you want to check this, please look at the French Fisc site (www.impots.gouv.fr) and the UK tax site www.hmrc.gov.uk. It is all there.Could one of the moderators kindly put this posting where it belongs in the Finance or Legal section please?RegardsPickles Link to comment Share on other sites More sharing options...
Russethouse Posted April 24, 2007 Share Posted April 24, 2007 Done [:)] Link to comment Share on other sites More sharing options...
avinalarf Posted April 24, 2007 Share Posted April 24, 2007 A clarification and a correction.Where is the two year french residence rule from? I'm not aware of it.UK tax is not charged at 40% or the 'maximum imposable rate'. Instead:The amount chargeable to CGT is added onto the top of income liable to income tax for individuals and is charged to CGT at these rates:below the starting rate limit at 10%, between the starting rate and basic rate limits at 20%, and above the basic rate limit at 40% Link to comment Share on other sites More sharing options...
Sunday Driver Posted April 25, 2007 Share Posted April 25, 2007 [quote user="avinalarf"] Where is the two year french residence rule from? I'm not aware of it.[/quote]If you are resident in another EU member state and you have previously been fiscally resident in France for two consecutive years, then the sale of a French property is free of CGT. I understand that this ruling applies to the sale of up to two French properties. Link to comment Share on other sites More sharing options...
Pickles Posted April 25, 2007 Share Posted April 25, 2007 [quote user="avinalarf"]Where is the two year french residence rule from? I'm not aware of it.[/quote]Apologies. I went into "short circuit" mode. I think SD has clarified the situation. [quote user="avinalarf"]UK tax is not charged at 40% or the 'maximum imposable rate'. Instead:The amount chargeable to CGT is added onto the top of income liable to income tax for individuals and is charged to CGT at these rates:below the starting rate limit at 10%, between the starting rate and basic rate limits at 20%, and above the basic rate limit at 40%[/quote]Thanks for this correction. Again, I was cutting corners. Apologies.Maybe if I cut and paste the postings we can put this as a FAQ?RegardsPickles Link to comment Share on other sites More sharing options...
avinalarf Posted April 25, 2007 Share Posted April 25, 2007 There are also tough rules on what improvements qualify for reducing the taxable gain - not all expenditure is. Link to comment Share on other sites More sharing options...
avinalarf Posted April 25, 2007 Share Posted April 25, 2007 So to clarify the above there is no two year french residency requirement for french residents. Link to comment Share on other sites More sharing options...
Pickles Posted April 25, 2007 Share Posted April 25, 2007 The following is the suggested FAQ – those in theknow, could you please check it for errors? The final version can recognise individual's contributions if required.Capital Gains Tax (CGT) on sales of French Property(Impot sur plus-value)Whether or not there is capital gains tax to be paidin France or elsewhere onthe sale of a property in Francedepends on several factors:French resident: The CGT position of a person whois French resident is that they have no French CGT to pay on the capital gain realisedon the sale of their principal (habitual) residence. The main requirement appears to be that it is their main (habitual) residence on the date of sale. If the sale concerns asecond home or other property (eg investment/let property), then CGT ischargeable at a rate of 16% of the gain after allowances. There will also be aliability for 11% social charges on the gain after allowances .If you are resident in another EU member state andyou have previously been fiscally resident in France for two consecutiveyears, then the sale of a French property is free of French CGT. From2006 this ruling applies to the sale of up to two French properties providedthat the second sale is of the only residence in France of the non-resident ANDthat the second sale takes place more than 5 years after the first sale thatwas exempted from CGT.If you are non-resident in France and have not previously been fiscallyresident in France for two consecutive years, there will be French CGT (pluspossibly CGT in your country of residence) to pay on the sale of any Frenchproperty: this is charged at a rate of 16% of the gain after allowances foran EU citizen, and 33% for a non-EU citizen.To calculate the gain, you start with the saleprice net vendor and deduct the initial purchase price including purchasecosts, the value of certain types of improvement works done to the property for which youhave valid receipts and the disposal costs. In Francethere is then a form of taper relief so that for every additional year after 5years of ownership the taxable gain is reduced by 10% until after 15 years ofownership there is no CGT to pay in France. To calculate the taxliability you simply multiply the gain after allowances and taper relief by 16%.If you are UK resident and domiciled then you will also have to declare thesale to HMRC and pay CGT on the gain after allowances - in the UK taper relief startsin year 3 of ownership but reduces the taxable amount by only 5% per year untilreaching a maximum reduction of the taxable amount of 40% after year 10. Henceafter year 10 in the UKyou would pay CGT calculated on 60% of the gain after allowances. The amountchargeable to CGT is added onto the top of income liable to income tax forindividuals and is currently charged to CGT at these rates (note the deletionof the 10% starting rate band was announced in the 2007 budget):below the starting rate limit at 10%, between the starting rate and basic rate limits at 20%, and above the basic rate limit at 40%Any French capital gains tax paidcan be offset against your UKcapital gains tax liability. Note that if you purchased the property before1998, the calculation is more complicated.The French Fisc site(www.impots.gouv.fr) and the UKtax site www.hmrc.gov.uk should be consulted for up-to-date details. Link to comment Share on other sites More sharing options...
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