CAPITAL GAINS TAX
When selling property in France there are taxes payable on the capital gain made between the time of purchase and the time of sale.
Exemptions:
There are five categories which qualify for exoneration.
The sale of a principal residence, if the owner is a tax payer in France and has owned the property for at least a year.
The sale of a house by a member of the EEC which is not a principal residence, on condition that the owner has been a fiscal resident in France for at least two consecutive years leading up to and including the date of sale.
The sale of a property which the seller has owned for more than 15 years.
The sale of a property for less than 15 000 euros.
The sale of a property by a registered disabled person or a retired person on condition that their income and assets meet a range of criteria.
Note : All information on these pages are set out and intended as a guideline only and should be verified with a notaire, advocate or lawyer should you wish to take any firm advice relating to any legal matter.
Calculations:
If capital gains are due they are calculated by taking the sale price and deducting:
Agency fees + Costs of all obligatory searches + The cost of lifting any mortgage + The purchase cost of the property including costs of purchase. (These are calculated at a flat rate of 7.5%)
Work done to the property which meets various criteria* and which can be justified by official receipts. Alternatively, if the property has been owned for over 5 years a flat rate of 15% of the purchase cost can be deducted without producing any formal justification.
The amount payable is then calculated on this figure. Ten percent of this figure is deducted per annum after the fifth year of ownership, effectively reducing the amount payable to zero after 15 years.
The amount of capital gains tax payable on this figure is 16% for members of the EEC. French tax paying residents pay an additional 11% for social contributions.
The notaire deducts the amount due at source and handles the required declaration to the authorities. Non residents are required to appoint a professional tax representative to handle filing the required tax declarations and provide required guarantees.
* Works considered to be pertaining to construction, extension, reconstruction, or improvement are considered to be deductible for the purposes of calculating capital gains taxes.
Official invoices need to be submitted which must display the rate of tva charged.
As a word of warning, repairs and maintenance are not considered to be deductible and the society dealing with submitting the tax declaration and guarantees tend to err on the side of caution. Many works that one would consider to be renovation they will submit as repairs.