When buying a property in France, one should never forget that the value of his property is most likely going to increase over the years with a potential capital gain which is always welcome. A CGT is applicable on this gain only.
In February 2012 a tax regime reform about capital gains on property sales resulted in doubling the holding period required to be exempted from tax and social security contributions: the time period to get exempted is now 30 years against 15 previously. The new CGT version consists in:
– 2% abatement per year after 5 years of ownership until 17 years of ownership
– 4% abatement per year during years 18 to 24
– 8% abatement per year during years 25 to 30
– No CGT after 30 years
If you are a resident in France the tax rate is 34.5%. This tax rate consists of capital gains tax at the rate of 19%, plus 15.5% social charges.
What tax rate for a real estate capital gain realized by a non-resident?
The method of calculating the capital gain realized by a non-resident is identical to the one of a resident with the exception of tax rates:
• 19% if the non-resident is resident for tax purposes in a Member State of the EEA (Member States of the European Union + Liechtenstein, Iceland and Norway)
• 33.3% if the non-resident is resident for tax purposes in another state and that state is not listed in the list of non-cooperative States or territories (Botswana, Brunei, Guatemala, Marshall Islands, Montserrat, Nauru, Niue, Philippines)
•50% if the non-resident is resident or established in a state or non-cooperative territory.
The principalities of Monaco, Andorra, French Polynesia, New Caledonia, Saint Pierre and Miquelon, Mayotte are not part of the European Union. The tax rate in these areas is 33.3%.
The 2012 amended Finance Act provides that from 17th August 2012 the real estate capital gain realized by non-residents is subject to social security contributions (CSG, CRDS …) at the rate of 15.5%.
Exemptions for a non-resident on his real estate capital gain tax
The exemption for the main residence doesn’t apply to non-residents (for tax purpose) which by definition don’t have their main residence in France. The exemption for the first sale of a dwelling that is not a primary residence, isn’t applicable to non-residents.
If you are non-resident, you can still benefit from a specific exemption for your residence in France (article 150 U II 2 of the General Tax Code) if the following conditions are met:
• You have the nationality of a member state of the EEA or of another state if permitted by a tax treaty.
• You need to prove you have been taxed as a French resident for at least two consecutive years prior to the sale.
• The property sold must have been your main home in France. It must have been yours since 1st January of the year preceding the sale.
• The taxpayer can benefit from this exemption for one property only.
This exemption may also apply to officials and employees of the State residing in France for tax purposes, but are working abroad.
2013 Additional Tax:
In addition to the basic rates of capital gains tax, since 1st January 2013 an additional rate of tax is also due on large gains.
The following table shows the different thresholds at which the supplementary tax is applied and the corresponding rates.
|Amount of taxable real estate capital gain||Tax rate|
|From €50,001 to €60,000||2 % RECG– (60,000 – RECG) × 5%|
|From €60,001 to €100,000||2 % RECG|
|From €100,001 to €110,000||3 % RECG – (110,000 – RECG) × 10%|
|From €110,001 to €150,000||3 % RECG|
|From €150,001 to €160,000||4 % RECG– (160,000 – RECG) × 15%|
|From €160,001 to €200,000||4 % RECG|
|From €200,001 to €210,000||5 % RECG – (210,000 – RECG) × 20%|
|From €210,001 to €250,000||5 % RECG|
|From €250,001 to €260,000||6 % RECG – (260,000 – RECG) × 25%|
|Beyond €260,001||6 % RECG|
|(RECG = amount of taxable real estate capital gain)|
Example for a EEU resident (not living in France):
|Sale price (after 01 jan 2013)||€300,000|
|– Previous purchase price (in Jan 2000)||€100,001|
|= Capital gain||€199,999|
|– Abatement on the number of years of ownership||€40,000|
|= Total capital gain subject to taxes||€159,999|
|Capital Gain Tax:|
|Net capital gain||€138,399|
The seller will receive from the notaire: €100,001 +€138,399 = €238,400
You can also use this French calculator to refine the results to your needs:
How do we pay the CGT in France?
The tax is paid at the time of transfer of ownership of property. The calculation and payment formalities are generally the responsibility of the “notaire” who takes care of everything (Thus you will receive a Net price on your bank account from him).