Capital Gains tax

[Le Petomane]

I keep getting conflicting advice on this one. I bought a house in France nearly seven years ago. At the time I was working in the Middle East, living in job-related housing. My French house was the only house I owned. Am I liable to CGT if I were to sell it now, and what would the rate be?

[derf]

If you are a French resident and have made Tax declarations in France then I am pretty sure it would be classed as your main residence and should be free from CGT, if not and you are tax resident elsewhere then it's a maison secondaire (even if it's the only property you own) and I believe that you would have to pay CGT, for a non resident it would be 16% on the profit, reducing to 0 on a sliding scale over 15 years.

 

[Judie]

The gain is actually calculated on the difference between the total purchase price, including agents and Notaires fees, deducted from the net sale price, excluding any fees, which are paid by the purchaser anyway.

The gain is reduced by 10% per annum from the 6th year of ownership until the gain is extinguished after 15 years of ownership.

 

[Bobdude]

One thing I have often wondered is whether in France there is an 'allowance' in the calculation of CGT? For example, the last property in the UK we sold was subject to CGT, but tax was payable on the profit AFTER  a yearly allowance was deducted (in the case of a property in joint names, this allowance was given to each owner) Years ago the allowance was between 4000 to 5000 pounds.

[Debra]

Sure its not 33%?  From that French Tax document someone posted recently:

* Capital gains from real property

Capital gains derived in France by taxpayers having their domicile for tax purposes outside France from the sale of real property, whether improved or not, immovable property rights, stocks or shares in unlisted property companies the assets of which consist mainly of real property, are subject to a 33 1/3 % levy discharging income tax liability.

However, methods for computing long-term capital gains allow for a significant limitation of the assessment basis. Currency erosion correctives are applied to the purchase price or to market value on acquisition, as the case may be. Moreover, long-term capital gains qualify for a notional relief of 5 % for every year the property is held after the second year, which means that they are tax exempt when sold after having been held for at least 22 years.

I saved the document itself so I don't have the link but I'm sure I got it from this forum somewhere!  I can't see a way to attach it here, so if you can't find it, let me know and I'll email it to you.

 

[Debra]

http://www.international-mortgage-network.com/france-tax.htm

This site says 26% (16% plus 10% social contribution), but that may be the rate for tax residents of France.

[Debra]

according to this site it depends whether you are an EU resident, rather than a resident of France.  http://www.frenchentree.com/france-tax-advice/DisplayArticle.asp?ID=2254

EU residents who are not French residents pay tax at 16% on French gains. Non-EU residents pay tax at 33.33% on any capital gains.

Note that they don't mention the 10% social charges.......

[Debra]

This site details the changes that were made in 2004 (including the change from 22 years before its free to 15 years) and does the bit about social charges imply that they might only refer to residents?  Not sure...........  A lot of sites and information, I know, but it does say on all of them that this is not an easy subject and you should get professional advice!

http://www.headdonconsulting.com/images/English/NewsItems/080104Changes%20to%20IT%20&%20CGT.htm

The tax rate is now fixed at 16%.  This rate also applies to those vendors who are residents of an EU country.  For those sellers resident outside of the EU, it is believed that the rate will continue to be 33.33%.

(NOTA: It should be borne in mind that there will be liability to social charges, certainly for residents, which will amount to about 10%, bringing the total bill to about 26%).

[derf]

and does the bit about social charges imply that they might only refer to residents?  Not sure........... 

For French residents selling a maison secondaire they would be subject to tax at 26%

[Judie]

It's actually 27% since January this year.