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Capital Gains Tax in France on Property

A guide to capital gains tax ( CGT ) on property in France and the UK for ex-pats and those owning a home in France

Disclaimer


All figures are stated on those given at the time of writing, but may be subject to change. The information supplied is a general view of the current situation only, and you are advised to take professional individual advice to accurately assess your situation and liability level. No responsibility can be accepted by the website or the author for any action or consequences thereof taken as a result of reading the information supplied in the article.

*** UPDATES ON FRENCH TAX LAWS ***

For an updated article on Capital Gains Tax and Social Charges, click here:

French Capital Gains Tax and Social Charges on Property 2014

Further information on French tax can be found on our site using this link:

Moving to France

Please note that information given in the articles found here may supersede the relevant sections below.

French Capital Gains Tax - changes, changes

This is a time of change for France, as it is for the UK. British property owners who live in France (Life in France), or who own holiday or investment property there cannot afford to take their eyes off the ball. Financial affairs are seemingly constantly under review, and no one can take anything for granted regarding property taxation issues. Capital Gains Tax (CGT) is a case in point.

Change in CGT law

On 1st February 2012, the laws in France governing how much CGT is payable on property sold, changed. This resulted in a rush of people trying to sell property before this date, so as not to incur the higher CGT charges.

How Capital Gains Tax on property is calculated

Capital Gains Tax on property is the tax payable on any net profit you may have incurred on the sale of a property (Selling houses in France, Property sales in France), once expenses, relevant exemptions and allowances have been deducted.

Expenses, exemptions and allowances

Expenses may include fees charged by solicitors, notaires and estate agents. Also costs associated with building or renovating a property may be taken into account, as long as invoices can be produced to back these up. As is always the case in France, the paperwork is essential to prove all legitimate expenses. Other criteria, such as for families with children, are taken into consideration when calculating exemptions but are relatively minor. Further exemptions may apply as per the new Thirty-Year Rule (see below). There was also a standard fixed 1,000 Euro (2,000 for a couple) allowance that could have been deducted from any capital gain, but this has now been cancelled.

Selling a main home in France if a French resident

If you are a full-time French resident and you sell your principle residence in France you are not liable for capital gains. However, there are one or two points to bear in mind. Should you move out of the house before it is sold, your exemption is not affected unless the property is subsequently occupied, whether or not you receive an income for this. Also, have the paperwork to hand to prove your full-time residency. Proof of your payments of Taxe d'Habitation will be required. (Taxe Foncière and Taxe d'Habitation - property tax in France.)

Selling a second home in France if a French resident

Should you be a French resident and own more than one property in France and subsequently decide to sell the second property, normal French rules on CGT apply. That means you are liable for CGT, and exemptions will be based on the Thirty-Year Rule.

Exemption for French residents selling a second home in France

There is an exemption, for those French residents selling second homes. The exemption affects owners of a property in France that is used as a holiday home or second home, where the owner does not own their main residence. So, if you own a holiday or second home in France but live in rented accommodation which is your main residence, you will not be liable for CGT on the sale of your French house, as long as you are a French resident. (Updated 20/2/13.)

The Thirty-year Rule

This rule, which came into effect on 1st February 2012, states that if you are a French resident and sell your second property in France when you have owned that property for thirty years or more (it used to be fifteen years or more), you will be exempt from the CGT and social taxes. A sliding scale of percentage exemptions applies before this time.

Sliding scale of liability on property

Any property sold before it has been owned for five years, which is not the main home of the seller, is liable for full CGT (see rates below). After this, the sliding scale kicks in, lessening the amount of CGT payable. A 2% reduction in CGT is applied if the property is sold during the next eleven years, followed by 4% per year for the next seven years, and finally 8% per year for the remaining seven years up until thirty years of ownership, when the property sale will finally be exempt from CGT. In simple terms, the resulting tax reductions will be roughly 10% after ten years, 20% after fifteen years, 40% after twenty one years, 60% after twenty-five years and 100% after the full thirty.

CGT rates in France and Social Charges

CGT is now to be charged at 19% rather than the previous 16%, and remember, if you are a tax payer in France you must also add the relevant social charges to this. Social charges are now set at 13.5% as from October 1st 2011, having increased from 12.5%, though bear in mind these are only levied on sales liable for CGT, not on those exempt under the thirty-year rule.

French resident selling a UK property

The Double Tax Treaty between Britain and France was signed by Britain in December 2009, and by France in January 2010. Effectively, this treaty made the following significant change with regard to CGT on property: British nationals who are resident in France will no longer benefit from the exemption which allowed them to escape paying CGT on the sale of their UK property. They are now required to declare capital gains in their country of residence, ie: France.

Good news for ex-pats in France

The good news, however, is that if you sell your UK property and you have owned that property for thirty years or more, you will be exempt from the CGT. A sliding scale of percentage exemptions applies before this time, which is the same as that which applies to the sale of French property (see above). You must also have been resident in the UK property for more than two years to claim total exemption, and it must have been your principal residence. This rule is now rigorously enforced, with the French authorities in particular demanding proof of length of residency.

UK resident selling a holiday home in France

Finally, if you are tax resident in the UK you will pay CGT in France on the sale of a second home in France in the same way as a French resident (by following the thirty-year rule and the sliding scale), but you can declare the amount paid and it will be set against any UK liability. So should the French CGT be lower than the calculated amount that would be payable in the UK, you must pay the extra to the UK authorities. However, wouldn't you just know it, it doesn't work the other way round. Should you find you have paid more in France in comparison with the UK calculation, no refund is available. C'est la vie. Once more, the paperwork to prove any entitlement to exemptions is vital. (French Tax on Holiday Homes Dropped.)

CGT rates in the UK

For gains after the 22nd June 2010, CGT in the UK is currently charged at 18% or 28% for individuals (according to income), 28% for trustees or for personal representatives of someone who has died, and 10% cent for those qualifying for Entrepreneurs' Relief.

Possible exemptions for UK residents selling a holiday home in France

However, new rules have recently been announced which may offset the above. The first rule is that UK residents (or EU non French residents) selling a second or holiday home in France, which used to be their main home for at least two years, may be eligible for a CGT exemption.

The second rule applies to those EU non French residents who own a property in France that they no longer live in, that was bought five years or more ago. If the property is sold and the resulting funds are used to purchase a house that immediately becomes their main home, a CGT exemption may be possible here too.

SCI property

If you hold shares in a property which has the funds held in a Société Civile Immobilière (SCI), you should be aware that the above new regime (thirty-year rule) does backdate to August 24th 2011. In the past, some property owners created SCI ownership for their properties, which effectively meant that they leased or rented their own property from a company without paying rent. This scheme also applies to many owners of leasehold property. So where the SCIs once offered tax advantages, this may well no longer be the case.

The future for CGT in France

Speculation about future changes to CGT in France is rife. With many voices of dissent demanding to be heard, it is always possible that the government will have yet another rethink. At the moment it would appear that this is unlikely to happen, at least in any major way, as the president, Nicholas Sarkozy, is carefully guarding his own popularity in view of the upcoming elections and is understandably wary of rocking his own boat by introducing more controversial measures at this time. After the elections, the story may be different as pressure for review is mounting due to the need to improve France's financial standing. Don't take your eye off the ball.

*** Please note that this article refers only to CGT on property. CGT on investments may differ. ***


Disclaimer Reminder

All figures are stated on those given at the time of writing, but may be subject to change. The information supplied is a general view of the current situation only, and you are advised to take professional individual advice to accurately assess your situation and liability level. No responsibility can be accepted by the website or the author for any action or consequences thereof taken as a result of reading the information supplied in the article.

Additional articles which may be of interest:


French Wealth Tax
Benefits in France for UK Ex-pats
Savings and investments in France
Sarkozy and French property owners
Tax in France
Health care in France - another U-turn by Sarkozy

About the author

Joanna Simm moved to the Languedoc area of south-west France in October 2004 having found her property through French Property Links.

your questions...

1. A question about CGT on the sale of second homes (added 29/3/12)...

I am thinking of selling my property in France in Brittany having had it for nine years. It is a secondare residence. If I change it to my main address and move to France my questions are :-

1) HOW LONG DO I HAVE TO LIVE THERE TO MAKE IT MY MAIN RESIDENCE?
2) HOW MANY TAX RETURNS DO I HAVE TO DO SO I DO NOT PAY CGT?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I understand that if you spend 183 days or more at your property in France each year, then that property is considered to be your main residence. However, how many years you must do this for in order to be exempt from CGT on the sale of this house, I am uncertain. I have heard it is just one year (with one tax return necessary), as well as two and five years. Certain conditions do have to be met, and it does sometimes vary between regions/prefectures.

Therefore, as I am not an expert in these matters, I would suggest you contact a legal advisor.

** We have now published an article with more detail about this. See Holiday Homes in France - how to avoid Capital Gains Tax when you want to sell. **

2. A further question on Capital Gains Tax (CGT) when selling a second home (added 29/3/12)...

We purchased a house seven years ago around Uzes. We would like to move locally to a larger property. Selling our existing house will incur Capital Gains Tax in both France and UK as it a second home. Seems unfair as we will be replacing our existing house with one of more value. Equally, one of the same value in a cheaper area would fall into this problem Any thoughts on avoiding this?

If not, it's worth considering when you purchase a house that the house you purchase should have potential for expansion to avoid attracting capital gains in subsequent sales as you require more space. The exemptions from CGT in UK are less generous than in France and are not based on percentage. Much is mentioned of CGT in France but beware the additional taxes on this side of the Channel can be more costly.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. Our article above does state the CGT that must be paid on French holiday homes when sold, and I would certainly hope most people are aware of any CGT implications in both France and the UK, when buying a second home in France. But your point about buying a big enough property in the first place, so that you don't have to sell up and buy a bigger property if you then need more space, is a good point.

Unfortunately the only way I can think of to reduce your CGT, would be for you to move to France and make your holiday home your main residence, and then sell it. Obviously this is not possible for the majority of people, but I understand it something that quite a few people do.

However, as I am no expert in these matters, I would suggest you contact a legal adviser for expert advice.

3. A question about where CGT should be paid (added 7/6/12)...

I have a question on CGT that I was hoping you can help with. I purchased a house in France outright in 2000. Since 2000 I have been a tax paying resident (self-employed) in the UK whilst renting as a tenant. I do not own any property in the UK. I am hoping to sell my existing house in France to fund the purchase of another house in a slightly different area of France (ie I would not be taking the money out of French property). In these circumstances would I be liable to pay CGT in either France or England? Many thanks in advance for your help on this matter.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. As mentioned in the article "Holiday Homes in France - how to avoid Capital Gains Tax when you want to sell", I do not believe you would be liable for CGT in France on selling your home. But, as you have been paying tax in the UK, I would assume you would have to pay CGT in the UK, according to UK rules.

However, as I am not an expert in these matters, I would suggest you contact a legal advisor.

4. Another question about where CGT should be paid (added 7/6/12)...

We recently (2012) sold a commercial property in England, owned since 1984. We will be paying French tax from Jan 1st 2012. What is our CGT liability? Is it in France or England? Thank you.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. As the above article says, you pay CGT where you are paying tax, which usually also means where you have your main residence. So if this is now France, I would think you would pay according to French CGT rules. However tax matters can be complicated, and may also be different with commercial property, so as I am not a tax expert, I would suggest you contact one.

You could also contact the legal advisors we have on our site to check on this.

5. A question about CGT laws and selling a second home (added 31/7/12)...

Could you clarify the law on Capital Gains Tax that requires me to pay a deposit(non-returnable) on my residence secondaire sale, if I cannot find a French resident to guarantee the payment, if any, of capital gains. Many thanks.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. Though I would suggest you contact a tax or legal advisor for accurate clarification of CGT rules and laws, as I am no expert.

Update to above...

Many thanks. As usual the French law seems to be a matter of interpretation and whatever a particular notaire thinks. I have a French friend finding out for me.

6. A question about the CGT payable on selling a second home (added 31/7/12)...

I own half of a house in France, bought using the LLC entity in early 2008. I am not an EU citizen and it is a secondary home, rented out for a few weeks a year to tourists. I doubt whether its value has changed much since we bought it for 126,000 Euros, my share being half of this. What would be the CGT if I were to sell my half after I have owned it for five years. Thanks.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. Though as I am not an expert in these matters and tax affairs are complicated matters, especially at this time, I would suggest you contact a legal advisor or tax specialist.

7. A question about CGT liability (added 31/7/12)...

I am thinking of selling my maison secondaire to move to another department. If the value of my current property is less than that to be purchased, will I still be liable for CGT? (I have owned the current house for ten years.) Thank you.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I would think that you would be liable for CGT, unless your new property is to become your main home. Though as I am not an expert in these matters and tax affairs can be complicated, especially at this time, I would suggest you contact a legal advisor or tax specialist.

8. A question about tax on the proceeds of a property sale (added 29/8/12)...

I am resident in France and can prove so by two tax returns and payment of Taxe d'Habitation. I am just about to sign a compromis for the sale of my property (premier residence). I have heard that I can only use the proceeds of the sale to purchase another property, otherwise I will be taxed on any amount not used to buy property, is this true, and if so what are the tax implications? Thanks in advance.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I am unsure of all the details of your case, but if you are a French resident and the property that you are selling is your main residence, I did not think any Capital Gains Tax would be due. As I am not a tax expert however, I would suggest you contact a tax advisor to find out what is going on here. (It sounds as if they are not considering you to be a French resident.)

9. A question about CGT on a French holiday home (added 29/8/12)...

My wife fully owns our home in the UK. If we bought a house in France in my name solely to use as a holiday home, would we be liable to French/British CGT when I sold it?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I would think that you might be able to avoid CGT on the sale of your French house, if it is in your name only and you do not own your main residence in the UK. Though as I am not a tax expert, I would suggest you contact a legal or tax advisor for accurate advice on the current exemptions. (The new social charges that have been added to CGT payable on the sale of property in France by non-residents, may also come into play.)

10. A question about non payment of CGT (added 4/10/12)...

I was living in France from 2003 until 2006. The property was my main residence. My daughter attended school in France but I was forced to sell my house due to a divorce. I left France and my half of the money was sent to me in 2007. Now nearly five years later the French Tax office are chasing me for CGT with penalties for non payment. I have moved house several times since my payment arrived and have always had my mail redirected. However they decided to send all correspondence in my maiden name which I have not used for over 30 years therefore nothing was ever redirected to me. Can you offer any advice as they are now taking me to court in France?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. This does not sound at all right to me, but as tax affairs can be so complicated, and as I am not an expert in such matters, I would suggest you contact a legal or tax advisor. (I assume you have taken this up with the French tax office, explaining your situation.)

You could perhaps use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

11. A question about expenses and CGT (added 4/10/12)...

Does the cost of installing a fosse septique count against capital gains tax on the sale of a second home in France for a non resident?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I have been in touch with my colleague Joanna who says:

"I think it might, although in practice it's probably tough to claim back. To have a good chance, it is best to ask at the Mairie/Prefecture for an approved workman to do the job, as often in France you can only claim back taxes on work if it is done by a designated person."

And as neither of us are experts in such matters, it might be worth contacting a tax/legal advisor for accurate advice.

12. A question about selling property at a loss and CGT (added 30/10/12)...

I live in France and own two properties. I am selling them both, to move within France. I sign the compromis on the one I don't live in, this week. I am selling them both for less than I paid for them due to the slow market at the moment. Do I have to pay Capital Gains Tax on these when I am actually taking a loss?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I was under the impression that if there is no capital gain, no capital gains tax is paid. However, I am not an expert in these matters and do not know your exact situation, so I would suggest you contact a tax or legal advisor, for accurate current advice.

13. A question about SCIs (added 30/10/12)...

Just a follow-up question please. Do you know if the CGT exemption for principal residences applies if the house is held in an SCI and the house is occupied exclusively by the SCI shareholders as their primary residence?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us, though as I am no expert in these matters, I'm afraid I can only suggest you contact a tax/legal advisor for accurate advice about this. You could perhaps use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

14. Tax on maison secondaires and can expenses can be redeemed to avoid CGT (added 13/12/12)...

I am a registered artisan with micro BIC tax status currently. I have a maison secondaire which I am about to sell, firstly can you tell me if the French government is about to relax the current level of tax (ie: 32 %)in 2013?

Also, I bought the house three years ago and renovated it myself spending some 30K on the project in materials alone (receipted) which will be seen as a gain although in real terms it's not. As an artisan, is there anyway I can redeem this, even if it means changing my business status (ie: possibility of invoicing myself)?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. Though as I am no expert in these matters, I'm afraid I can only suggest you contact a tax/legal advisor for accurate advice about this. You could perhaps use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

Or perhaps PKF (Channel Islands) Limited might be able to help. They provided the information for our article "French Tax Changes in July 2012".

Email: french.tax@pkfci.com
Telephone: +44 1481 727927
Website: www.pkfguernsey.com

15. A question about the amount of CGT that will be owed (added 13/12/12)...

Hello - I am thinking of selling my house in Ariege. I have had the house for ten years. I bought the house for my retirement and pension. I only rent in the UK. I have been renting the house out through an agent for the last two years to help with costs and declared income to the UK through an accountant. As my French is limited, I have found it quite stressfull trying to communicate to whom I pay tax to in France. Financially I have worked out that by time I've paid tax on income, paid for maintenance, insurance, accountant fees and interest on loans in the UK, it is better for me to sell. However I love my house as well as France. If I sell for 170,000 Euros and bought for 113,000 Euros, what will the CGT be?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. Though, as I have replied above, I am afraid I cannot answer your question as I am no expert in these matters. I would suggest you contact a tax or legal advisor, perhaps using the following link on our site:

http://www.frenchpropertylinks.com/frenchlegalservices.htm

You could also perhaps contact PKF (Channel Islands) Limited, who provided the information for our some of our articles on tax in France (www.pkfci.com or telephone +44 1481 727927).

16. A question about whether CGT is payable in France or the UK (added 25/3/13)...

We have rented out our UK house and moved to France. We've been here for nearly six months. We are now about to sell our UK house and will make a capital gain of approx. 200k. Is it true that because our only residence is now in France we are Tax Resident in France? Is it also therefore true that we'd need to pay French CGT on our 200k gain? A cost in the region of 60k! Seems harsh since we are only on an extended holiday in France and will probably return to the UK in the summer.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. You do not say how long you owned your UK property for, which would affect the CGT you would pay in France, or if you are paying tax in France, but basically I understand that if you are resident in France and paying tax in France, you would have to pay French CGT on the sale of your UK house. However, if you have only been in France six months, and are planning to return to the UK, this may affect things.

And as I am no expert in these matters and the rules seem to have been changing constantly, I would suggest you contact PKF (Channel Islands) Limited, who provided the information for our some of our articles on tax in France (www.pkfci.com or french.tax@pkfci.com or telephone +44 1481 727927). You could alternatively use the following link on our site:

http://www.frenchpropertylinks.com/frenchlegalservices.htm

17. A question about exemption from CGT (added 25/3/13)...

We are resident in France and have lived in our property for about eight years. My wife and children plan to relocate to the UK this summer, purchasing a home, with me continuing to live in our property in France, which would continue to be my main home, though I plan to fly back to the UK on a regular basis. If or when we sell our French home in the future, say after a few years, can you confirm that we would be exempt from CGT?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I would think that if the house in France is in your name, and you continue to be a French resident and are paying taxes in France, then this French property would be considered to be your main place of residence and would be exempt from CGT.

However, as I am no expert in these matters, as above, I would suggest you get confirmation of this from a tax/legal advisor. You could perhaps use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

Or perhaps PKF (Channel Islands) Limited might be able to help. They provided much of the information in our tax articles.

Email: french.tax@pkfci.com
Telephone: +44 1481 727927
Website: www.pkfguernsey.com

18. A question about how to avoid CGT on the sale of a maison secondaire (added 9/4/13)...

I and my wife own our main property in the UK. We have owned a maison secondaire in France for six years and would probably expect to sell this in around a further ten years. Are there any sensible measures we should now be putting in place to minimise our tax liability at that time.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us, though as I am no expert in these matters I would suggest you contact a tax/legal advisor as I have mentioned above. You could perhaps use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

Or perhaps PKF (Channel Islands) Limited might be able to help. They provided much of the information in our tax articles.

Email: french.tax@pkfci.com
Telephone: +44 1481 727927
Website: www.pkfguernsey.com

19. A question about CGT when buying a property as a main residence (added 9/4/13)...

I am soon to move to France, and will be a French resident. I would like to buy or build a home, this being my principal place of residence (no residential real estate elsewhere in the world). What is the minimum number of years I must live there in order for this to be free of capital gains tax? Is it one year, five years??

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I understand that once you are a French resident, and your property is your main residence, then you do not incur capital gains tax on this property if then sold. Our article "Holiday Homes in France - how to avoid Capital Gains Tax when you want to sell" explains how long it might take to get residency, and what is involved. This includes submitting tax returns. We say that you must submit tax returns from your property for 1-2 years, this depending on where you live. Regions and departments and even prefectures can differ on their requirement for the number of tax submissions necessary. You might like to read the full article for further information on becoming a resident.

An update on the above...

My husband has a French passport and as his wife, I would have no trouble obtaining residency and in due course, citizenship. But my question was simply how long must one live in a principal place of residence to avoid any capital gains taxes. From looking at the article mentioned, it mentions no time limits. Therefore, in theory one could live there for as little as a few months??

An answer to the update...

I understand that once you are a French resident, you do not incur capital gains tax (CGT) on the sale of your main residence. So if you can obtain French residency immediately, then there should be no time limit on when you sell your main residence to be exempt from CGT, as I am not aware of any law which states how long you must have occupied your property for.

However, the tax authorities need to know this is your main residence. So to prove this is your main residence, I understand that certain criteria will help your case. These are mentioned in our article "Holiday Homes in France - how to avoid Capital Gains Tax when you want to sell". We say:

"So, to avoid paying CGT when you come to sell your French house you need to submit tax forms from that address for anything up to one or two years. Regions and departments and even prefectures can differ on their requirement for the number of tax submissions necessary."

"Payment of the Taxe d'Habitation is a proof of residency, as unlike the Taxe Foncière it is usually only paid by the occupier. Your name on the utility bills is also a useful extra proof, should it be required."

"Although by far the most important factor in establishing a house in France as your main residence is your tax situation, there are instances where other factors can come into play. If there is any query about your residency (if it cannot be established through taxes and financial/business interests), it is helpful to have lived in the French property for at least 183 days. This is considered to be habitual residency and is enough to establish main residency."

Having said all this, as I am no expert in these matters I would suggest you contact a tax/legal advisor for clarification and confirmation of this. You could perhaps use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

Or perhaps PKF (Channel Islands) Limited might be able to help. They provided much of the information in our tax articles.

Email: french.tax@pkfci.com
Telephone: +44 1481 727927
Website: www.pkfguernsey.com

20. A question about invoices/bills offsetting CGT (added 30/8/13)...

Are only artisans' bills accepted to offset capital gains tax on a holiday home?

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I was under the impression that as long as there was paperwork (bills, invoices) to prove work was done on property, and this work was done by companies/persons registered in France, then this could help to offset CGT. As I am no expert in these matters however. for accurate advice I would suggest you contact a tax or legal advisor.

You could perhaps contact those at BDO Ltd who provided many of our articles on tax. Virginie Deflassieux, Catherine Le Pelley or Kirsty Green can be reached at french.tax@bdo.gg or telephone +44 1481 724561. Alternatively visit their website www.bdo.gg and click on French Tax.

21. A question about a possible exemption from CGT (added 30/8/13)...

I/we have a 2nd home/holiday home in France. Redundancy created the need for another job or a project. I selected a project renovating a property in the Deux-Sevres region. We have owned the property thirteen years and with the old capital gains system, selling in a couple of years would have not been a issue. If Holand stays in power we will have to pay CG and social tax as we are not residents , main home is in the UK and we spend less than six months a year in France.

My question is should we sell the house and purchase another using all the capital, would the 1st sale be liable to CGT? The idea being when we return to the UK we will sell the last house having made no profit. I think I know the answer but one can only dream.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us. I would think that unless the second house you purchase in France using all the capital from the sale of your existing French house, becomes your main residence, then you would be liable to CGT. However, I am no expert in these matters so would suggest you contact Virginie Deflassieux, Catherine Le Pelley or Kirsty Green at BDO (formerly PKF) Limited. They provided much of the information in our tax articles.

Tel: +44 1481 724561
Fax: +44 1481 711657
Email: french.tax@bdo.gg
Website: www.bdo.gg - click on French Tax

You could perhaps use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

22. A question about CGT on profit incurred from exchange rates (added 30/8/13)...

We have a cottage in France that we intend to sell possibly for the same amount that we bought it for, but we will make profit purely on the exchange rate which will be approximately 20k Euros. We are both retired British pensioners and the house is in both of our names. Would we have to pay tax on this amount in Britain? I pay 20% tax but my wife does not pay tax. What other taxes does one pay on a sale of a house in France? We have no mortgage on the house in France which was a cash buy.

Jo Rhodes, editor of French Property Links replies...

Thanks for contacting us, though I am afraid I am unsure as to whether you would have to pay tax on exchange rate profit. I am also not aware of any other tax you would have to pay on selling your house in France, but as I am no expert in these matters, as above, I would suggest you check with Virginie Deflassieux, Catherine Le Pelley or Kirsty Green at BDO (formerly PKF) Limited. They provided much of the information in our tax articles. Contact details are as follows:

Tel: +44 1481 724561
Fax: +44 1481 711657
Email: french.tax@bdo.gg
Website: www.bdo.gg - click on French Tax

You could perhaps also use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

23. A question about possible exemptions (added 10/12/13)...

I have been unable to find on any website confirmation of your "Posssible Exemptions". I have contacted three Notaires in France asking for confirmation and all three responses were negative. Can you show me a link to where the "Possible Exemptions" are explained in more detail, or where you found the information originally, please?

Our reply...

Thanks for contacting us. I am trying to get an answer from BDO Limited, who have provided us with many of our tax articles, but as yet have not heard anything. They did not write the article to which you refer however, and I am unable to find where the source of this information came from. Should you want to try contacting BDO yourself for clarification of this issue, you could contact Virginie Deflassieux, Catherine Le Pelley or Kirsty Green at french.tax@bdo.gg, or telephone +44 1481 724561.

24. A question about CGT when taking over full ownership of a property (added 14/1/14)...

My husband and I bought a house in Brittany about ten years ago. We don't live in it, but have used it as a holiday home. Unfortunately my husband died in November and our affairs are going through probate. My question is this, when everything is sorted and the house is solely in my name, I intend to sell it. Will I have to pay the equivalent of capital gains tax? The house is already half mine, so it's not as if I have gained the value of the house. I'd be very grateful for your advice.

Our reply...

Thanks for contacting us. Capital Gains Tax (CGT) is paid on any gains made on the sale of property (subject to certain possible deductions), if it is not your permanent residence, which I understand to be the case here. So yes, I would think you would have to pay this tax when you sell, as per the current CGT rules. As you have owned your house for ten years, there will be a reduction following the taper relief system (see our latest tax article which includes information on CGT - http://www.frenchpropertylinks.com/moving-to-france/french-tax-September-2013.html). For expert advice on the amount you should expect to pay, I would suggest you contact a tax/legal advisor.

25. A question about the necessity of bank statements as proof of costs (added 27/3/14)...

Please warn your readers not to part with old bank statements! This is why (and do you please know of a solution?!) My husband and I bought a building plot fifteen years ago, in Provence, and spent from 2001 to 2005 organising the build of a house on it. We have now negotiated the sale of the house, with a completion date in August. Because it is selling for more than 150,000 Euros, we have had to employ a tax representaive from the government to work out the capital gains tax (impots de plus value). However, no gain has been made at all by us. We are selling the house for 435,000 Euros, and it cost in excess of 630,000 Euros to build. We have all the bills, and most receipts from the build, but the tax representative is insisting on bank statements as proof of costs, and apparently no other proof is acceptable. This is a fairly recent ruling from the French government. Whilst we were doing the build no proof of bank statements was required for capital gains tax purposes, but now, in retrospect, it is. I find this vastly unfair as I haven't kept the bank statements as they were not required during the years we were building. The government has changed the goal posts, and it is totally impossible for me, because of French and British banking laws, to be able to access archived statements.

It is bad enough for us that we have made a huge loss on the property, but to have the threat of having to pay an estimated capital gains tax because the rules regarding the bank statements has changed, is both worrying and illogical. My husband and I are pensioners, and we are reliant upon the money from this house sale to pay off our UK debts and fund our retirement. Is there anything you can please do to help? We feel there should be alternative ways to prove what the house cost us, as the bank statement ruling has been introduced retrospectively?

Our reply...

Thanks for contacting us. I have not come across this rule before about bank statements being the only proof acceptable for costs, or the fact that you are unable to access archived statements. Can you check with another tax advisor if this ruling is right? Or perhaps check with your Mairie? You could also try contacting a legal advisor using the following page on our site:

http://www.frenchpropertylinks.com/frenchlegalservices.htm

Should anyone reading this be able to shed any light on these issues, please do get in touch.

26. A question about CGT liability when owning two French properties (added 4/8/14)...

I have read all your articles about CGT with interest but cannot find an answer to my question, which is - we have owned our French house for over twelve years and have lived in it permanently for seven years. We wish to move to another area in France. Can we put our main residence on the market and buy another property as our main residence, so we would in fact own two properties for a while until the old property was sold? Could we do this without incurring Capital Gains Tax?

Our reply...

Thanks for contacting us. And an interesting question. I would think it might depend on how long it took to sell your old residence. If you moved to live in your new property, and your old house remained empty and you still were paying your property taxes here, maybe you wouldn't have to pay CGT. But if it took a while to sell your old house, I guess your new property would then become your main residence, and you would have to pay CGT on the sale of your old residence. If you remain in your old residence until sold, but in the meantime buy another property, then CGT wouldn't be a problem.

However, as I am no expert in these matters, I would suggest you contact a tax expert, perhaps Virginie Deflassieux, Catherine Le Pelley or Kirsty Green at BDO Limited (french.tax@bdo.gg, or telephone +44 1481 724561).

You could perhaps also use the following legal services found on our site:

French Legal Services and Solicitors
http://www.frenchpropertylinks.com/frenchlegalservices.htm

An update...

Many thanks for your reply Jo. Might be easier to sell this one, move into rented and then buy one, would I be free of the dreaded CGT then do you think?

Our reply...

Yup - think so. Might be better to check this out with a tax expert though!

27. A question about CGT when selling a house in the UK (added 2/12/14)...

I have lived in France with my partner since 2007 - she owns the house we live in. We are classed as overseas landlords, we are joint owners of a house in the UK, we purchased together in 1987, and are thinking of selling it as part of our pension pot. Am I right in thinking that the CGT is less 60 percent less on net profit, due to the length of ownership. Plus we are not liable to pay UK CGT as we have lived in France over five years.

Our reply...

Thanks for contacting us. You may be pleased to hear that there is currently no CGT to pay on properties owned for more than 22 years. We mentioned this in our update to this main CGT article, in another article "French Tax ( Capital Gains Tax - Stamp Duty - Dividends ) - September 2013". However, there will still be social taxes to pay of 15.5%, as this taper relief still extends to a period of 30 years. But I understand you should get a 73% discount on this, after 27 years. I would also think that if you are French residents and have lived in France for over 5 years, you would not have to pay CGT in the UK.

However, as I am no tax expert I suggest you get advice from a tax/legal advisor. Perhaps you could contact BDO Limited, who provided many of our tax articles. The contacts there are Virginie Deflassieux, Catherine Le Pelley or Kirsty Green at french.tax@bdo.gg, or telephone +44 1481 724561.

*** Since answering this query, new rules regarding Social Charges may soon be coming into effect. Keep an eye open! ***

28. A question about a possible exemption from CGT (added 10/3/15)...

We moved back to the UK in 2010 after having spent 15 years in France. We rented a flat in Paris and owned a property in Burgundy. We would now like to sell this property. The new law states that we are exempt from CGT if we were previously tax payers for 2 consecutive years in France. This is the case. Does this mean however that we would have to have been living permanently in the house in Burgundy or does the fact that we were renting in Paris still count? Also if we are indeed exempt from CGT in France would we also be exempt in the UK? Thanks.

Our reply...

Thanks for contacting us. As we say in our updated article "French Capital Gains Tax and Social Charges on Property 2014", I understand you can possibly claim exemption from CGT on the sale of your Burgundy house, but only if this house was your main residence, which it doesn't sound like it was. (Other criteria also applies.) Regarding the CGT payable, I understand that as you are now resident in the UK, CGT would be payable in the UK and France. You would have to pay any CGT owed in France according to French rules, but can then off-set this against any UK liability. Again, information on this is included in the aforementioned article.

29. Another question about possible exemption from CGT (added 10/3/15)...

Thank you for this helpful site. I didn't find the answer to my question above. Apologies if I overlooked it. My question: Does the former 15-year rule exempting a second property bought from any, and all, French CGT still apply to properties bought before 2012? Or would the new 30-year rule apply to those properties, too? The property in question is a flat in Paris bought in 2005 and rented out as a second residence since 2008.

Our reply...

Thanks for contacting us. We now have an updated article, "French Capital Gains Tax and Social Charges on Property 2014" (http://www.frenchpropertylinks.com/moving-to-france/capital-gains-tax-france.html), which should help you. I am not really sure of your circumstances, but the new rule is currently now 22 years long (for CGT), and will apply to any property that is sold in France while this rule is current (so will apply to your flat bought in 2005).

An update...

Thanks. I guess you're saying that as an American, and as a non-resident of France, I still could benefit from zero CGT as long as I hold the property for the full 22 years?

Our reply...

Yes, though this is French CGT so you would probably have to pay CGT in the US wouldn't you? Sorry, I'm not familiar with US tax. Also, currently you would still have to pay the social charges until you have owned the property for 30 years.

A further update and additional question about social charges...

Thanks again, I think that's correct about CGT in the US although it's presumably a bit lower than France. Last question: As to "social charges" do you mean the annual habitation and annual foncieres?

Our reply...

See the more recent article I mentioned for information on social charges… they are different to Taxe Fonciere and Taxe d'Habitation. They are made up of a number of different taxes. But, the European Court has recently ruled that it was illegal for France to charge these, for European Economic Area non-residents. No doubt it will take time for France to agree. Not sure how it will affect you but it may well be the same for US citizens. (So hopefully you won't have to pay these.)

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