The key points of the capital gains in France and how it is calculated
The difference between the sale price and the purchase price that I originally paid for my French property equals the capital gain on which I have to pay tax in France. This sum is subject to income tax if the sale does not fall within the cases of the exemption provided by law. The income tax to be paid by non-French-residents (someone who lives outside France for over 6 months/year) is 20% (30% over 27,519€/year)
These are the main points about capital gains tax in France
What is the capital gains tax?
The capital gains tax is the difference between the sale price (less the stamp duty /transfer costs and the amount of VAT paid) and the purchase price (plus the registration fee actually paid at the time of purchase or a flat-rate of 7.5% of the purchase price).
This amount is subject to income tax. During a real estate transaction, it is the notary who calculates the amount of the real estate capital gain and deducts it when the deed of sale is signed.
Tax on capital gains in France: cases of exemption
You may be exempt from property capital gains tax if the sale concerns your main residence (French residents); if the property has been yours for more than 30 years or if the amount of capital gains is less than 15,000 euros.
How is the French property capital gains taxed?
The tax is made up of a CGT 19% tax and a set of social security contributions representing 17.2%, making a total of 36.2%. The longer you remain the owner of the property, the more the amount of the tax will decrease, according to a system of discounts starting from the 5th year. The discount rate to apply for each year of ownership will be, from the 6th to the 21st year: 6% for the CGT and 1.65% on social security contributions. When the 22nd year is over, the rates will be 4% and 1.60% respectively. And beyond the 22nd year, an exemption will be applied for capital gains tax while the rate will be 9% for social security contributions. Beyond 30 years, the exemption will be total both in CGT and social contributions. When you file your tax return, don’t forget to indicate the amount of capital gain declared by the notary!
The renovation or upgrade works taken into account for the assessing French capital gains tax
We always advise clients who buy a French property to keep the invoices of the companies that will carry out the work during the years they will be owners. For a property that has been owned for more than 5 years, it is indeed possible to deduct a flat rate of 15% of the purchase price or the actual amount with invoices to prove it”.
The works may concern the construction, reconstruction or extension of the property. Invoices must be in the name of the owner and indicate the exact location of the works. Moreover, these invoices must be issued by companies; they cannot be proof of purchase of materials for work carried out by the owner himself.