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French Capital Gains Tax and Social Charges on Property - updated 2017

An updated guide to capital gains tax ( CGT ) and social charges 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.

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

French Capital Gains Tax - how it is calculated

Capital Gains Tax in France on property is the tax payable on any net profit you may have incurred on the sale of a property, once expenses, relevant exemptions and allowances have been deducted. Currently the rate is 19%. However, there is no tax to be paid if any property is sold for 15,000 Euros or less (30,000 Euros for joint ownership), whatever the gain. There is also no tax to be paid on property sold that was your main residence.

Social charges in France

In additional to Capital Gains Tax (CGT), a fee must be paid for Social Charges on any capital gain. The rate for Social Charges is 15.5%. For residents of France this fee has been long standing, but the very sudden introduction of new rules in September 2012, which stated that non-residents of France must also pay this tax, was very controversial. See the end of this article for the most recent news on Social Charges, which currently must be paid by both residents and non-residents of France.

Expenses, exemptions and allowances

The amount of Capital Gains Tax you pay may be reduced by looking at expenses, allowances and exemptions. 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. Allowances may be made for the elderly or disabled, or those going through divorce. More substantial exemptions may apply as per the Twenty-two Year and Thirty Year Rules which are explained below.

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 Tax or Social Charges. Proof of your payments of Income Tax and Taxe d'Habitation will be required. And it is generally thought that you must have resided in the property for a minimum of eight months for it to be classed as your principle residence. 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. The property can usually be empty for up to a year, but bear in mind this may be subject to local tax rules.

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 Social Charges, and exemptions will be depend on how long you have owned your property for.

The Twenty-Two Year Rule for Capital Gains Tax

This rule states that if you are a French resident and sell your second property in France when you have owned that property for twenty-two years or more (it used to be thirty years or more), you will be exempt from the CGT. A sliding scale of percentage exemptions applies before this time.

Capital Gains Tax 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. After this, the sliding scale kicks in, lessening the amount of CGT payable. A 6% reduction in CGT per year is applied if the property is sold during the next sixteen years, followed by a 4% reduction for the final twenty-second year of ownership, when the property sale will finally be exempt from CGT. In simple terms, the resulting CGT reductions will be roughly 30% after ten years, 60% after fifteen years and 100% after the full twenty-two.

The Thirty Year Rule for Social Charges

This rule 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, you will be exempt from Social Charges. As with CGT, a sliding scale of percentage exemptions applies before this time.

Social Charges sliding scale of liability on property

Any property sold, which is not the main home of the seller, is liable for Social Charges. As with CGT, there are no allowances for the first five years of ownership, after this, the sliding scale kicks in, lessening the amount of Social Charges payable, though this is over thirty years not twenty-two. A 1.65% reduction in Social Charges per year is applied if the property is sold during the next sixteen years, followed by a 1.6% reduction for the twenty-second year of ownership, followed by a 9% per year reduction for the last eight years, when the property sale will finally be exempt from Social Charges. The resulting reductions in Social Charges will be roughly 8.25% after ten years, 16.5% after fifteen years and 100% after the full thirty.

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. There are rules which must be satisfied, and it is always a good idea to go through everything with a notaire or legal advisor. This exemption is only valid if the property is sold after more than five years of ownership, the owners of this second home must not have owned their main residence for four years before the sale, the proceeds from the sale must be used in the purchase of their new main home, which must be bought within two years of the date of sale of their old second home, and finally, this exemption can only be used once.

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 means that UK citizens who are resident in France who sell property in the UK, are required to declare capital gains in their country of residence, ie: France. However, the same Twenty-two Year Rule applies, so if you sell your UK property and you have owned that property for twenty-two years or more, you will be exempt from CGT. The same 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

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 Twenty-two Year rule). You can then declare the amount of CGT 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. (Capital gains are declared using HMRC Form SA108 and you claim any French Capital Gains Tax paid as a credit against any UK Capital Gains Tax due using Form SA106 "Foreign", with the assistance of Helpsheet 261.)

Please note that currently (2017), social charges paid in France are unable to be used to offset any liability to UK taxation, due to the terms of the taxation treaty between the UK and France.

Exemption for UK residents selling a former home in France which was their main residence

From 1st January 2014, new rules came into affect regarding UK residents who used to live in France and who still own property in France, which was their main residence. These rules mean that they may not be liable for CGT or Social Charges on the sale of this property. But, they must have been French residents and submitted tax returns in France for a continuous period of at least two years prior to the sale of the property, the property must be sold within five years of them leaving France, or if it is sold after this time, the property must not have been rented out from 1st January of the previous year to when the property sells. The property must be owned directly, and the maximum exemption is 150,000 Euros. This exemption can only be used once.

*** 2017 UPDATE REGARDING SOCIAL CHARGES FOR NON-RESIDENTS OF FRANCE ***

On the 26th February 2015 the European Court ruled that the collection of Social Charges from European Economic Area (EEA) non-residents of France on the sale of French property, as well as rental income, was illegal. So EEA non-residents, who sold property in France from 2012-2015 and paid Social Charges, were able to claim these back.

For those who wanted to claim a refund, they were advised to contact a legal advisor, or write to their property tax office (Centre d'Impots), referring to the EU legislation, following this up with a second claim to their nearest administrative court.

Further to the above, on the 27th July 2015, the French Supreme Court confirmed the ruling of the European Court, so Social Charges were then not incurred by non-residents of France, selling a second home.

However, in 2016 the French Government changed the rules, amending the allocation of the social charges so that they did not infringe European law. So once again, non-residents of France had to pay up. This is currently still the case in 2017, though watch this space, as these laws may well be challenged and changed.

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

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.

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


Moving to France

your questions...

1. Questions about what can be offset against CGT (added 7/1/15)...

We are selling our holiday apartment and have been told that for capital gains in France they must use the selling price including the value of the furnishings and the buying price less the value of the furnishings - is this correct? Can we set the notaries and agents fees from the purchase of our apartment against the capital gains on the sale?

Our reply...

Thanks for contacting us. If you are selling your apartment with furnishings, and you bought it originally without furnishings, then I would say it may be correct. If this wasn't the case, then I am not sure it is correct. But as I am no expert, I would suggest you confirm this with a legal/tax advisor.

Regarding the notaires and estate agent fees, as we say in the article, these should be able to be used against capital gains made when selling.

An update...

Thank you for the reply, the property was purchased with furniture and both the purchase and selling documents give the total selling price and a price for the apartment and a price for the furnishings. But the notaire has said that French law states he must use he total selling price (including the price for the furniture) and the purchase price excluding the price for the furniture. He has also said regarding the purchase, we can claim the agents' fees but not the notaire's fees.

Our further reply...

This is odd and not what I thought. Might it be worth getting a second opinion from another Notaire or your Mairie?

I was fairly sure costs of Diagnostic tests and fiscal representative charges (so Notaires) could be deducted from the sale price (as well as estate agent fees). With Notaires fees and estate agent fees previously paid on purchasing the property, also being added to or included in the original purchase price used to work out the capital gain. Also I thought furniture could be excluded from the sale price subject to an inventory being prepared with accompanying invoices. But I guess I may be wrong - apologies for the confusion if so.

2. Another question about offsetting CGT (added 10/3/15)...

I sold a property in France in December 2014 making a considerable loss. I now want to sell a property in the UK. Can I offset the loss on the French property against my UK capital gains tax bill?

Our reply...

Thanks for contacting us. If you are resident in the UK, this makes sense to me (that you should be able to), but as I am no tax expert I would suggest you contact a tax expert for accurate advice. Or indeed contact the HMRC.

3. Changes in French law - a lot of chasing needed (added 23/4/15)...

My wife and I sold our joint owned holliday home In Normandy on 12/08/14. We paid cash for the property in August 2005. We duly paid capital gains tax etc, a lot of the internal renovation was done by my family. All renovation material was purchased in France, all TVA was also paid, we had Artisans receipts for a complete re-roof and new loose core drive - but during the sale all my bills were not accepted.

A few weeks after the sale the Immobillier sent me an email pointing out the change in the French Law. So the forms she sent me I had to fill in and send away with both of our UK P60s. This was done 30/08/14 under registered letter, but we have heard nothing to date.

Our reply...

Thanks for contacting us. Although you don't say which change in French law you mean or what exactly you are seeking re-imbursement for, if this refers to social charges I would certainly keep chasing if you have heard nothing back from the relevant authorities. I wonder if you've contacted your nearest administrative court yet, to make a second claim? Incidentally I don't understand why your receipts for the work you had done on your house weren't excepted when you sold your house, to offset any capital gain - it doesn't seem right to me. But I am sure you must have queried this at the time. Good luck with it all.

4. Tax advisor needed (added 19/5/15)...

Please could you send me the name of an advisor who has experience of dealing with capitlal gains tax on the sale of a UK house by a French resident and possibly a dual French and English resident.

Our reply...

Thanks for contacting us. You could try BDO Limited, their 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

5. A question about CGT if you sell a house in France once you are back in the UK (added 19/5/15)...

I have been fully tax resident in France for ten years owning a house which is my prime residence. If I move to the UK, how long do I have to sell the house before being liable for French capital gains tax.

Our reply...

Thanks for contacting us. We deal with this issue towards the end of the above article. We say:

"Exemption for UK residents selling a former home in France which was their main residence

From 1st January 2014, new rules came into affect regarding UK residents who used to live in France and who still own property in France, which was their main residence. These rules mean that they may not be liable for CGT or Social Charges on the sale of this property. But, they must have been French residents and submitted tax returns in France for a continuous period of at least two years prior to the sale of the property, the property must be sold within five years of them leaving France, or if it is sold after this time, the property must not have been rented out from 1st January of the previous year to when the property sells. The property must be owned directly, and the maximum exemption is 150,000 Euros. This exemption can only be used once. "

Though for expert advice, perhaps you could contact BDO Limited and/or use the legal services mentioned in our reply above.

An update...

Thanks for this advice. However, I am still a resident of France and I believe that if I sell my prime residence prior to or within twelve months, I am not subject to Capital Gains. If I go outside this time frame then I presume your statement below prevails. Thanks again.

Our reply...

Sorry, I didn't know you would still be a French resident. This is also mentioned in our article, in the paragraph headed "Selling a main home in France if a French resident" - and I understand is as you say, though with certain conditions. What I have said above I understand applies to UK residents, so if after this time you still haven't sold your house and you are a UK resident, then what I have said above would apply.

6. Questions about being eligible for the sliding CGT rule (added 19/5/15)...

I have an apartment in Paris which counts as "secondary residence", bought in 2004. I am a tax resident of the UK, but a Swiss citizen (so not EU). If I read the recent legislative changes correctly, if I sell my apartment today, I will not be liable to the social charges and the most I would need to pay would be 19%. What I am not sure about is whether as a UK tax resident (with a Swiss nationality) I would be eligible for the sliding CGT schedule? And if not, will I be eligible when I become a UK citizen (which would be circa 2017)? Many thanks!

Our reply...

Thanks for contacting us. Though I'm afraid that as I am no tax expert, and your situation is slightly different, I can only suggest you contact a tax advisor for accurate advice about this. Perhaps, as we mention above, you could get in touch with BDO Limited (french.tax@bdo.gg, or telephone 01481 724561). Or you could use the following legal services found on our site:

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

7. A question about CGT% payable (added 9/6/15)...

We have a second home in France which we have owned since June 2003, and after all the recent changes we have read about regarding CGT and social charges, are you able to provide me with an approximate total CGT % that we would pay bearing in mind any sliding scales, if we sold our house next year?

Our reply...

Thanks for contacting us. I can only go by what we have covered in our article, so I would say that after 13 years of ownership there should be a 48% reduction in your capital gains tax. So as CGT is currently at 19%, after 13 years of ownership you should only pay tax on your capital gain at an approximate rate of 9.88% (48% reduction in tax). Though this does not take into account any expenses, exemptions or allowances that may or may not be possible.

For an accurate costing, it may be worth talking to a tax/legal advisor.

8. A question about where CGT is paid (added 27/2/16)...

My father is thinking of moving to France. He owns a farm in the UK and would like to buy a farm in France. Would he have to pay CGT before he leaves the UK or would it roll over to France?

Our reply...

Thanks for contacting us. I would say he would have to pay CGT in the UK, but as I am no expert in such matters, I would suggest you contact a tax advisor.

9. A question about CGT liability (added 27/2/16)...

If a British resident had a French property for over thirty years and decided to sell, would they be liable for either French or English CGT?

Our reply...

Thanks for contacting us. I would think they would be liable for UK CGT only, though for expert advice I would suggest you contact a tax advisor.

10. Refund of Social Tax - how long does it take and how much does it cost? (added 8/6/16)...

How long does it usually take and how much does it usually cost to get a refund of the Social Tax which was incorrectly deducted from the proceeds of a house sale in France? We have been waiting for six months since our Fiscal Representative made the claim and it seems we are faced with a Tribunal and a charge of 8% (possibly recoverable).

Our reply...

Thanks for contacting us. I'm afraid I don't know how long these refunds are usually taking to process, and I wasn't aware it would cost anything, so I cannot be of much help.

Should anyone reading this be able to offer any advice, please do get in touch.

11. Question about when to pay CGT (added 15/7/16)...

I am selling a rental property in the UK. As I am now a French resident I know I pay UK tax first and then also declare to the French tax office and pay the difference. What I need to know is when, as my local tax office has given me two opposing answers:

1. Declare within a month of selling.

2. Declare with my 2017 (for 2016) tax form.

Please can you tell me which is correct as I don't want to incur penalties for late payment. Thank you.

Our reply...

Thanks for contacting us. I would think it would option 2, with your 2017 tax form, but as I am no expert in these matters, I'm afraid I can only suggest you contact a tax advisor. Perhaps you could get in touch with BDO Limited (french.tax@bdo.gg, or telephone 01481 724561). Or you could use the following legal services found on our site:

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

12. Is there a CGT benefit on transferring out of a limited company (added 12/4/17)..

On retirement and on (bad, very bad) advice we bought a modest flat in Paris in the name of a UK Ltd. in 2002, making our children "shareholders". Would it be worth transferring out of the Ltd so as to benefit from the lowering of CGT if we sell in three years. If so how? Many thanks.

Our reply...

Thanks for contacting us. For individual expert advice on such matters, I can only suggest you contact a tax advisor. As in our reply above, perhaps you could get in touch with BDO Limited (french.tax@bdo.gg, or telephone 01481 724561). Or you could use the following legal services found on our site:

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

13. A question about offsetting social charges against UK CGT (added 3/11/17)...

I am a British tax payer and have owned a house in France for 22 years. I recently sold the house and paid 13,000 Euros in social charges. Can these charges be offset against British capital gains tax?

Our reply...

Thanks for contacting us. Unfortunately, currently I don't think you are able to offset these charges against UK CGT, as I believe the double tax treaty between France and the UK specifically excludes these charges. However, as I am no expert in this matter, I would suggest you contact a legal/tax advisor for advice.

14. A similar question to the above about social charges paid by UK residents (added 3/11/17)...

As I understand it, UK CGT on a second home in France sold by a UK resident and taxpayer is subject to relief to the extent of the amount of CGT paid in France. Does any similar UK CGT relief exist in respect of the Social Charge payable in France on the property sale?

Our reply...

Thanks for contacting us. I'm afraid though, that I do not understand there currently to be any UK tax relief with regard to the social charges paid in France, as we mention in the above article:

"Please note that currently (2017), social charges paid in France are unable to be used to offset any liability to UK taxation, due to the terms of the taxation treaty between the UK and France."

15. A question about the allowances for Social Charges (added 7/12/17)...

I may have missed it from the above however is the social charge for a non resident to be paid if the house being sold is a second residence and been owned for twenty six years and therefore with either a substantially reduced capital gains tax charge or, possibly, under the twenty-two year rule no capital gains in France?

Our reply...

Thanks for contacting us. You are correct in saying that you should not be paying any CGT if a second residence is owned for more than 22 years. However, currently Social Charges are charged according to the 30-year rule, so you will have to pay these but at a sliding scale as we say in the above article:

"As with CGT, there are no allowances for the first five years of ownership, after this, the sliding scale kicks in, lessening the amount of Social Charges payable, though this is over thirty years not twenty-two. A 1.65% reduction in Social Charges per year is applied if the property is sold during the next sixteen years, followed by a 1.6% reduction for the twenty-second year of ownership, followed by a 9% per year reduction for the last eight years, when the property sale will finally be exempt from Social Charges. The resulting reductions in Social Charges will be roughly 8.25% after ten years, 16.5% after fifteen years and 100% after the full thirty."

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