Capital gains tax on selling?

[Simon]

I believe that previously if you'd owned your house for over twenty years, there was no capital gains tax to be paid.  Now the time period has been increased to thirty years, is this correct? 

I've owned my house for twenty years, if I was to sell, what percentage of  CGT would I have to pay?

Thanks

[NormanH]

It was 15 years, then changed to 30, but I believe it has now dropped beck to 22 years.

Don't forget that there are quite a few expenses allowed too.

[tinabee]

The latest proposal is for 22 years in 2014, I believe. There is a good website here that has up to date articles and a simulator to allow you to estimate plus value

http://www.leblogpatrimoine.com/impot/plus-value-immobiliere-une-exoneration-apres-22-ans-de-detention-en-2014.html

you can register for email updates from the site which will have articles about any new changes

 

[Pickles]

As of 1st September 2013, to be exempt from French CGT, you have to have owned it for 22 years. However, to be exempt from French Social charges, you have to have held it for 30 years.

There are allowances for purchase fees and improvement works, which can be either default amounts (IIRC 7.5% for purchase fees and 15% for improvement works) or the actual amounts if greater.

For CGT, the taxable gain is reduced by 6% per year from the 6th year, with the remaining 4% in the 22nd year. There is an additional "exceptional" reduction in the taxable gain (where it is not entirely exempted by period of ownership) of 25% (of the remaining gain after the allowed costs and reductions for length of ownership) for sales which are concluded between 1st September 2013 and 31st August 2014. 

For CSG/CRDS, the taxable gain is reduced by 1.65% per year from the 6th year until the 21st year. In the 22nd year it is reduced by 1.60, and thereafter 9% from the 23rd year. The 25% exceptional reduction in the taxable amount stated above does not apply to social charges.

The site:

http://bofip.impots.gouv.fr/bofip/292-PGP

gives official details.

However, you will still be required to pay HMRC capital gains tax. This is calculated by taking the sale price and sale costs, converted into sterling at the exchange rate prevailing on the date of sale, and subtracting the purchase price and purchase costs, converted into sterling at the exchange rate prevailing on the date that you purchased, and the costs of any improvements, converted into sterling at the exchange rate prevailing on the dates that they were paid for. You will have the UK annual CGT allowance of £10900 each (2013/14) and you will be able to offset the French capital gains tax paid against the UK CGT, but unfortunately not the social charges.

[WendyG]

 

Confusing - for a numbers idiot like me can anyone please work out roughly how much at the end of the day one would expect to pay French capital gains tax and social charges on a sale at 250,000Es with purchase price of  100,000Es and expenses of say 50,000Es if the house was owned for say 12 years.  This for a residence secondaire.

WendyG

 

[Pickles]

If you go to the following site

http://www.sarf.fr/PPLCT2013.php

you will find a simulator that will do all the French tax calculations for you. I had ignored/missed out the surtax that applies on gains of more than €50K.

For anyone who comes back to this post after any future changes, go to:

http://www.sarf.fr and select the appropriate simulator.

Note that for a UK-resident selling a holiday home in France that has not been their principal residence that they have owned for a reasonable length of time, because of exchange rate fluctuations it is likely that there will be a significant UK CGT to pay.

In WendyG's case, depending on the actual date of purchase (only whole years are taken into account) then the tax on the figures given would be:

Just over €7.5K for CGT

Approx €9.5K  for social charges

No surtax

However, your UK tax will be based on a rather higher sterling gain (of the order of £150K before taking into account the costs of works) due to exchange rate gains, and you will have to pay more to HMRC.

[Simon]

Many thanks for the detailed replies and links, now I have something definite to go on.  We are just thinking about selling and haven't come to a decision yet.

Simon

 

[Mrs Trellis]

I'm hoping the CGT doesn't apply to full time residents of France?  The trouble is, it can take so long to sell houses now.  If we rent out the old house meanwhile, I have a nasty feeling we'd be liable for full CGT when/if we sell it.

[mint]

You're expecting to make a gain then?

Lucky you![:)]

[dr orloff]

[quote user="Mrs Trellis"]

I'm hoping the CGT doesn't apply to full time residents of France?  The trouble is, it can take so long to sell houses now.  If we rent out the old house meanwhile, I have a nasty feeling we'd be liable for full CGT when/if we sell it.

[/quote]

If you rented it or even let a family member just live in it then you would.be liable to CGT on a gain.

[Mrs Trellis]

Make a gain?  Well of course we may not, so CGT wouldn't apply, but we bought the house in 2003 and replaced the grotty mismatched bathroom suite, adding a shower, put in a fitted kitchen and had the electrics done so we can hope!   That's if we can ever sell it of course.  It is a small 2 bedroomed village house so..... possibly easier to sell than a big expensive property.

[Chiefluvvie]

Strewth! I see things have moved on a pace here!

Of course CGT applies to 'full time residents of France' ! Just like it applies to full time residents of just about anywhere....

Crikey.....

[Pickles]

[quote user="Mrs Trellis"]I'm hoping the CGT doesn't apply to full time residents of France?  The trouble is, it can take so long to sell houses now.  If we rent out the old house meanwhile, I have a nasty feeling we'd be liable for full CGT when/if we sell it.[/quote]

In France there is a dispensation from CGT on your primary residence and this IIRC extends to several years after moving if you have been living in France and making French tax returns for several years. Sorry, I don't have access to the detail at present, but I think Parsnips has posted on this previously.

If you go back to the UK, then for HMRC you would have 3 years from when you moved out of the house to sell it free of UK CGT, even if it is let in the interim. Thereafter the UK CGT goes on the number of years that it was your principal private residence versus the number of years for which it was let.

[tinabee]

[quote user="Mrs Trellis"]

Make a gain?  Well of course we may not, so CGT wouldn't apply, but we bought the house in 2003 and replaced the grotty mismatched bathroom suite, adding a shower, put in a fitted kitchen and had the electrics done so we can hope!   That's if we can ever sell it of course.  It is a small 2 bedroomed village house so..... possibly easier to sell than a big expensive property.

[/quote]

If you had the work done by registered artisans then the cost of the works may be deductible from any gain. You would need to check with a Notaire to determine what is classed as "allowable costs".

[Mrs Trellis]

Thanks folk.

Most of the work was done by OH but the electrics by a local entreprise.

I thought CGT did not apply to one's main or only property in either country.  I'm pretty sure we didn't pay it on any of the 4 UK houses we lived in and sold (one after the other, obviously!)

[tinabee]

[quote user="Mrs Trellis"]

Thanks folk.

Most of the work was done by OH but the electrics by a local entreprise.

I thought CGT did not apply to one's main or only property in either country.  I'm pretty sure we didn't pay it on any of the 4 UK houses we lived in and sold (one after the other, obviously!)

[/quote]

If it is your only property in France but you rent it out, then it is not your principal residence, since one assumes you will be living somewhere else.

The key to avoiding CGT in France is that it must be your principal residence, i.e. where you are actually living.

 

[Chiefluvvie]

tinabee you're doing a sterling job but I fear Mrs T just does not get it....!

To be clear Mrs T - you can only have ONE 'principal' residence anywhere in the world and generally (!? there are exceptions outside the EU) this will be CGT exempt.

Certainly, within the EU, you can only be 'fiscally resident' in one place BUT, you will also be liable for relevant taxes on your 'worldwide' income and assets. So, as an EU resident - only ONE property you own, anywhere in the world, can be CGT exempt. The exemption does not extend to one property per country!

I would also add that sales of 'foreign' owned property (i.e. owned by non-residents of France) are reported to the relevant tax authorities wherever the owner is fiscally relevant e.g. to HMRC where you are a UK resident selling a property in France. In this situation, as has already been stated, a UK resident would be subject to French AND UK CGT - if the UK CGT rate is higher (it currently is!) based on your nominal income tax rates - double whammy!

Chiefluvvie

[Alan Zoff]

Within time limits, a UK taxpayer can elect to make a particular property the main residence for CGT.

[Gardengirl]

Some interesting info/links on this thread.

English neighbours completed on the sale of their apartment in our block 9 days ago. They had owned it for 5½

years, (as have all of us who bought from new), and had 30,000€ deducted by the notaire from the amount paid by the buyers, to cover expenses/work done during that time, rather than them having to supply receipts etc, which we thought we'd have to do when we eventually decide to sell. In fact, they've done little or nothing to add any value apart from a very smart kitchen they installed when they bought. According to this couple, their English solicitor has told them that the price they achieved minus that 30,000€ will mean that they won't pay CGT in either country.

Interestingly, they put their apartment up for sale a year ago with 2 local estate agents, neither of whom found many people interested in it. They then placed it with a third local agent, who came up with the purchaser in 2 weeks; an English couple, who hadn't managed to buy another apartment in town. Up to now, all apartments sold on in our block have gone to French/Belgians. The sale of apartments and town houses has held up very well here.

[Pickles]

[quote user="gardengirl "]They had owned it for 5½

years and had 30,000€ deducted by the notaire from the amount paid by the buyers, to cover expenses/work done during that time, rather than them having to supply receipts etc, which we thought we'd have to do when we eventually decide to sell. In fact, they've done little or nothing to add any value apart from a very smart kitchen they installed when they bought. [/quote]

I am assuming that the had the property as a holiday home ...

It sounds like the notaire has given them the default allowances, which are 7.5% of the purchase price for purchase costs and 15% for improvements.

If these came to €30K, then it looks like the original purchase price was about €133K and the net vendor sale price was about €163K

[quote user="gardengirl "]According to this couple, their English solicitor has told them that the price they achieved minus that 30,000€ will mean that they won't pay CGT in either country. [/quote]

If the purchase and sale prices calculated above are correct, then the €30K of allowances balances out the capital gain calculated in Euros, hence no French CGT.

However, the €30K default allowances do not apply in the UK (you have to use real values, receipted), and the capital gain has to be calculated on the purchase price converted into sterling at the exchange rate on the date of purchase, the real values of purchase costs and improvements converted into sterling at the exchange rate on the date on which they were incurred, and the selling price converted into sterling at the exchange rate on the date of sale. Given that they bought at a Euro:£ exchange rate of about 1.39 € to the £ and sold at about €1.19 € to the £, their gross gain is about £41K. Approx £21K of this can be set against the UK CGT allowance for two people, (assuming that there are 2 of them) and so we are left with £20K. Now, if the notaire's fees plus the costs of the improvements come to more than that, then yes, there is no UK tax to pay. If not, then there is UK CGT to pay.

[Gardengirl]

Thanks for that Pickles, very interesting. The apartment was a holiday home and was owned by a married couple (if it makes any difference). The original purchase price was around €250,000 and the asking price was €325,000 and I believe they achieved a sale price of around €310,000.

Our apartment is smaller and was cheaper, and we're not thinking of selling. It was interesting to hear about the €30,000, which I thought they meant was a flat rate, but which I now realise wasn't. So we might well need our bills from the kitchen installation, aircon and awning - assuming that they all count of course.

Money was paid at various stages of building over about 2 years, so the exchange rate varied quite a bit, but I don't imagine it would make a huge difference.

[Pickles]

Ah, OK, on those numbers:

In France, the allowance deducted for the purchase costs would have been €18750 (or else actuals if higher), and the default allowance for improvements would have been €37500, which leaves a French gain of only €3750, so if the sale and purchase figures deviated only a little from that, you can see that the French gain could easily be zero. However, the UK capital gain before allowances is of the order of £80K, so there would seem to be very little chance of them avoiding (substantial) UK CGT.

[Mrs Trellis]

To be clear Mrs T - you can only have ONE 'principal' residence anywhere in the world "

I am quite aware of that!  You may have read my post differently from how I meant it.  We lived in 1 French house for 5 years, full time.  We then bought a 2nd one and have moved in.  House number one is now empty. I was under the impression that if it was sold within a certain time (2 yrs?) CGT would not apply - but if it was rented out at all, it no longer qualified as a maison principale and therefore CGT would apply.

I was just responding to a post that seemed to say that CGT was payable on any house sale whilst I though it was not if it was your only or main house.  In the UK we just moved up the ladder 4 times, selling 1 house and buying another at the same time, as most people do, and I don't remember paying CGT.

[Rabbie]

[quote user="Mrs Trellis"]

To be clear Mrs T - you can only have ONE 'principal' residence anywhere in the world "

I am quite aware of that!  You may have read my post differently from how I meant it.  We lived in 1 French house for 5 years, full time.  We then bought a 2nd one and have moved in.  House number one is now empty. I was under the impression that if it was sold within a certain time (2 yrs?) CGT would not apply - but if it was rented out at all, it no longer qualified as a maison principale and therefore CGT would apply.

I was just responding to a post that seemed to say that CGT was payable on any house sale whilst I though it was not if it was your only or main house.  In the UK we just moved up the ladder 4 times, selling 1 house and buying another at the same time, as most people do, and I don't remember paying CGT.

[/quote]Certainly in the UK you do not pay any CGT on the sale of your principal residence. As far as I am aware this also applies in France and in many other countries. However you do need to check the rules if you move before your first house is sold