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CGT on selling French House if residence secondaire


WendyG

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Hope this is right topic.  It may have been done to death previously but I have not found a definitive answer!

If, as a British owner of a residence secondaire, you sell the property, how is the CGT etc worked out?

Renovation work has been carried out by a mixture of ourselves and proper French artisans.  Presumably one can claim for the French artisans work but not for work carried out by oneself.  Property owned for nearly 5 years now, am getting fed up with weather and escalating costs and am thinking, only thinking at the moment, of selling and moving further south and downsizing at the same time.

Does one pay CGT in France and/or in UK and at what percentage to either or both?

Many thanks in anticipation.

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Assuming that you are not in the French tax system and pay tax in the UK.

Calculate Gain by deducting purchase price from (including fees) selling price

Reduce gain by money spent on French artisan's invoices.

Reduce gain by 10% for each full year of ownership after the first five.

Taxed at 16% on remaining balance.

You will then have to declare the gain in the UK

and after any allowances pay tax at either 22% or 40% (depending on your tax rate) less any tax already paid in France.

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A couple of things to add -

In France, after five years of ownership, you can allow a standard percentage (I think 15% but am probably wrong) to cover repairs etc, rather than producing artisan's receipts (must be from TVA-registered companies). This is handy if you have done a lot of work yourself, for example.

In Britain, you have an annual allowance for capital gains and you pay CGT on total gains above this allowance. So if you have made no other taxable gains in that year you may pay no tax. No equivalent allowance exists in France, so unless the gain is very small you will almost certainly have something to pay. Though there does seem to be a 'Chinese whisper' on certain other forums that you do not pay tax in France if the profit is less than 50,000€, but not much hard evidence to support that.

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Wendy, not CGT itself, but there is another charge associated with it nowadays that you may have to pay if you live outside France. You may have to appoint an accredited representative in France to work out your CGT. The costs can be quite hefty and you should build this into your calculations if necessary:

This link should be of help (read where it says "Payment of the withholding : the accredited representative key player:"):

http://www.notaires.fr/notaires/notaires.nsf/V_TA_PUB/SMSI-5ZLK9Q?opendocument

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[quote user="TarnGranny"]

Wendy, not CGT itself, but there is another charge associated with it nowadays that you may have to pay if you live outside France. You may have to appoint an accredited representative in France to work out your CGT. The costs can be quite hefty and you should build this into your calculations if necessary:

This link should be of help (read where it says "Payment of the withholding : the accredited representative key player:"):

http://www.notaires.fr/notaires/notaires.nsf/V_TA_PUB/SMSI-5ZLK9Q?opendocument

[/quote]

When we purchased in March 2005, from a UK resident, all of the paperwork relating to CGT was undertaken by the Notaire handling the sale/purchase and he simply passed the net proceeds onto the seller.

 From discussions with the seller I'm pretty sure no other representatives were involved.

Benjamin

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TG said you may have to have a tax representative, rather than you would. It's worth bearing in mind, though the only time I have seen this particular provision enforced was in the case of a house of reasonably high value, belonging to English sellers who had lived in France for many years but never joined the French tax system. So naturally enough they had to pay plus value as the French CGT is known, and their affairs were extremely complicated anyway. It is unlikely in a routine sale or purchase, but always a possibility if the seller is not fiscally resident in France.
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[quote user="Benjamin"][quote user="TarnGranny"]

Wendy, not CGT itself, but there is another charge associated with it nowadays that you may have to pay if you live outside France. You may have to appoint an accredited representative in France to work out your CGT. The costs can be quite hefty and you should build this into your calculations if necessary:

This link should be of help (read where it says "Payment of the withholding : the accredited representative key player:"):

http://www.notaires.fr/notaires/notaires.nsf/V_TA_PUB/SMSI-5ZLK9Q?opendocument

[/quote]

When we purchased in March 2005, from a UK resident, all of the paperwork relating to CGT was undertaken by the Notaire handling the sale/purchase and he simply passed the net proceeds onto the seller.

 From discussions with the seller I'm pretty sure no other representatives were involved.


Benjamin
[/quote]

 

It's a fairly recent requirement I believe. An old client of mine had to do it this year, and there were 2 people on FrenchEntree's forum a while back who had to do it as well - they weren't happy with the costs either!

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Our sale is scheduled for 11th January and our notaire invited us to see him last week to give us a rough idea of how much tax we would have to pay.   He is including any invoices for work carried out such as having the heating repaired and maintenance items which we did not think would be included.

Absolutely no mention of having to appoint anyone else to do it for us.

Pat

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[quote user="La vieille"]

Our sale is scheduled for 11th January and our notaire invited us to see him last week to give us a rough idea of how much tax we would have to pay.   He is including any invoices for work carried out such as having the heating repaired and maintenance items which we did not think would be included.

Absolutely no mention of having to appoint anyone else to do it for us.

Pat

[/quote]

Make sure that he will not just be passing on all the paperwork to one of the Accredited Companies in due course, because that was what happened to the two people on FrenchEntree, and then they got a shock when another bill arrived for a lot of Euros - hopefully you will be OK, but the requirement is in place as you can see on the Notaires de France web site!

I would recommend anyone in this position to double-check with their Notaire - one of the reasons why the requirement is in place was that the Government was apparently finding a lot of errors after the event (even years later when they get round to checking the figures (figures prepared by Notaires), and they weren't getting what they were due. The Accredited Companies guarantee the Government that if there are errors found later after the sales then they will pay the difference themselves.

Good luck with your sale!

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The way this is now reading is that the Accredited Companies guarantee is no more than an insurance policy type operation to ensure that the French goverment cover themselves against any mistakes made by a Notaire.

So the seller whose Notaire gets it right is actually sudsidising the seller whose Notaire gets it wrong. Why can't the final sales account be passed directly to a second party, independent of the Notaire, so that the transaction can be verified before the seller receives the net proceeds and a standard commercial accountancy fee is paid? For the amount of work involved this surely cannot amount to a lot of Euros ?

Benjamin

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It looks like this all stems from a law dated 04/08/2005: http://www.sarf.fr/fichiers/8m105.pdf

There is more Information here from this Accredited Company's site: http://www.sarf.fr/anglais.asp - this part "appoint a tax representative if the share of the price of sale you are to receive is greater than 150,000 €", if I understand it correctly, may be why some posters have not had to go through appointing an accredited representative - i.e. if you are to receive no more than 150,000 Euros from your house sale there is no need to go through all the rigmarole, and I assume that the Notaires in those cases are free to carry on doing the calculations!

In the cases over 150,000 Euros I agree with Benjamin when he says "So the seller whose Notaire gets it right is actually sudsidising the seller whose Notaire gets it wrong. Why can't the final sales account be passed directly to a second party, independent of the Notaire, so that the transaction can be verified before the seller receives the net proceeds and a standard commercial accountancy fee is paid? For the amount of work involved this surely cannot amount to a lot of Euros ?" - unfortunately, the Accredited Companies (3 of them) are independent second parties, but they seem set to make much more money than standard accountancy fees!
 

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