Capital Gain Tax in France

Taxation is a complex issue and many people do not know what they need to do to avoid legal problems. Luckily, we are here to help! This blog post will teach you about capital gains tax in France so that you can keep as much of your hard-earned money as possible. What exactly is capital gain? We’ll answer this question and more in the following paragraphs…

How Is Capital Gains Tax Calculated in France?

Capital gains tax fixed at 19%, meaning that residents pay more than most countries when selling homes in France. However, there are many factors that affect the final amount of tax payable.

For example, a 17.2% social charge is added to the original amount. Property-related surcharges also apply and should be considered.

The people who own property are required to pay 19% tax for any capital gains, even if they don’t live there. On top of these high taxes, they also have to deal with a 17.2% social charge for capital gains from real estate deals.

Real Estate Capital Gains

Surtaxes

A surcharge is levied on property gains. The good news is that you can sell your primary property without paying capital gains tax.

Tax exemptions

If the primary home is sold as a primary place of living, it is not subject to capital gains tax.

However, if you vacate the home without selling it, any relief that has been given to you will be lost even if it has been your primary residence for years.

If  the house is put up for sale while still the primary residence, the tenant has 12-months where rules aren’t applied. The exemption does not apply to individuals who aren’t registered with French tax system.

Once an owner has stayed in the home for six years, a taper relief mechanism reduces tax payments. 

If a secondary property is put up for sale, the profit can isn’t taxed if the primary home wasn’t owned for the previous four years or if the cash generated from the sale is reinvested back into the individual’s primary house.

As a French citizen, you aren’t required to pay capital gains tax from real estate if you are on a state pension. However, there are two requirements :

1. They were not required to pay wealth tax during the previous year before the property sale
2. The taxpayer’s taxable income for the previous tax year before the property sale was less than a certain amount

Calculating Capital Gains

You can calculate the capital gain by deducting the purchase price of your home from its sale price. A further 7.5% can be deducted for non-routine maintenance expenditures and house refurbishing costs. The task should be completed by a licensed contractor and it’s important to hold proof of what work was carried out.

The cost of modifications to a home that is sold after 5 years has elapsed is valued at 15% of the total price. In this case, the homeowner does not need to show any evidence.

Capital Gains on Shares

A person’s gains on financial assets, like shares, are taxed according to the marginal tax rate of the homeowner. All gains are subject to a 17.2% social charge. As such, the tax rate for movable assets can be 64.5%.

Any investments that are held for over two years but less than eight years fall under a 50% taper relief. Holding for over eight years sees this relief climb to 65%. The subsidies are not applicable to social fees, which are assessed at 17.2 percent of the entire gain.

A broader exemption for the shares sold from SMEs also applies. They must have been made in the last ten years and br located in the European economic area (EEA). 

Other Moveable Goods

Certain movable assets such as jewelry, antiques, and paintings may incur a capital gains tax. The following goods are not subject to capital gains tax:

• Common household items
• Furniture
• Cars
• Goods less <= €5,000 in value
• Goods owned for over 12 years

Actual acquisition fees and growth expenditure are taken into account in the calculation. Furthermore, for each year that the asset is owned, you can reduce the taxable amount by 5%. The taxable amount falls under a predetermined rate of 19%, as well as social security contributions of 17.2%.

A taxpayer has the choice of selecting a special withholding method for chargeable items. These tax rates are 6% for items like jewellery and artwork, but 10% for precious metals. When the 0.5% social charges are added, the total amount of withholding tax is 10.5% or 6.5%.

Sale of Land (Lotissement)

Lotissement is a French legal concept that refers to the division of land into plots. These plots are then sold to buyers for a profit.

The profits from the sales of these plots are taxed in the same manner as gains from any other trade. All non-residents who undertake these activities are subject to a 19% withholding tax, subject to double taxation exemptions.

If the land wasn’t bought to be resold specifically, any profit on sales is taxed as a capital gain. Costs associated with construction can be factored in.

Need Some Expert Advice?

At Elitax, we can offer you expert advice on your capital gains tax. We specialise in optimizing our client’s wealth and assets to get the most out of their money while staying within French law.

We have a dedicated team whose sole purpose is to find solutions for our clients, according to individual needs and requirements, so that they pay no more than necessary.

Get in touch with our advisors for a free 30-minute consultation on +33 (0)1 43 71 10 05