Understanding French capital gains tax: everything you need to know - FrenchEntrée

Published: April 5, 2022 by FrenchEntrée 14 required reading

In France, real estate and movable property are subject to capital gains tax and social contributions

Value gains tax is mandatory for both residents and non-residents and can be more than 40% in certain cases, so it's important to know your tax obligations before you decide to sell your second home. Here's what you need to know about French capital gains tax.

Does value gains tax apply in France?

Yes.Value gains tax (or plus-value in the French version) is payable in France on gains from a sale or transfer''real estate and movable property. Value added tax is subject to basic tax and social contributions. Value added tax is levied on:

• Buildings (built and unbuilt), land and other immovable property
• Victimized property
• Interests in real estate
• Real estate companies

In this article, we focus on the taxation of capital gains on the sale of a second home or property in France. To find out how capital gains tax applies to other real estate and chattel investments when gifting, transferring or exchanging real estate or a business, we recommend contacting one of our recommended international''tax advisors.

Do I have to pay capital gains tax on the sale of my French property?

The value gains tax (impôt sur les plus values) and social contributions (contributions sociales) are payable on the sale of a property in France if it is sold at a profit. However, there are some exemptions, mainly:

• Value gains tax and social contributions are not payable on the sale of your main residence (including land and outbuildings)
• Value gains tax is not payable on the sale of a second home if you have owned it for more than 22 years; social contributions are not payable on the sale of a second home if you have owned it for more than 30 years.
''
• No capital gains tax is payable on the sale of a property under €15,000

Note: there are other exemptions and conditions not covered in this article.

What is the amount of capital gains tax in France?

In France, value added tax is payable at a rate of 19% and social contributions are payable at a rate of 17.2% - a combined 36.2%. However, there are also exemptions, additional taxes payable on large gains, and a reduced rate of social contributions for EU and UK residents. In some cases, the combined rate of capital gains tax and social charges may be 42.2%, in other cases it may be 0%. Let's take a look at the main rates and exemptions in''with regard to value added tax and social contributions.

Value gains tax in France

Value gains tax is charged at a rate of 19% on value gains. However, there are exemptions that depend on the length of time you have owned the property and are called "L'abattement pour durée de détention pour l'impôt sur le revenu" in France.

• After 22 years, the sale of your property is no longer subject to capital gains tax.
• If you have a second home that you own:
  • Under five years: there is no relief and you will have to pay capital gains tax at the full rate of 19%
  • Six to 21 years: the benefit increases by 6% per year up to a maximum of 96%
  • 22 years or more: 100%''(i.e. you won't pay tax on capital gains)

Social Value Added Tax in France

French social contributions for investment and value added are calculated on the basis of three different rates with a maximum total of 17.2%:

• CSG (Contribution sociale généralisée or Generalized social contribution) - 9.2% / 0%
• CRDS (Contribution pour le remboursement de la dette sociale or Contribution to the repayment of social debt) - 0.5% / 0%
• Prélèvement de Solidarité (Solidarity tax) - 7.5%

The full rates apply to property owners who are resident in France or non-resident in the EU. However, for EU/EEA residents and UK residents after Brexit, only the 7.5% social deductions apply (under certain''conditions; see section on non-residents below).

Social deductions can also be reduced, depending on the length of time you have owned the property - after 30 years the taxable amount is completely exempt. If you have a second home that you own:

• Under five years: there is no exemption and you will pay the full rate of social contributions
• Of six to 21 years: benefit increases by 1.65% per year up to a maximum of 26.40%. For the 22nd year of ownership: +1.60% increase
• For 22nd to 19th years of ownership: benefit increases by 9% per year up to a maximum of 91%
• 30 years and over: 100% (i.e. you do not pay social contributions on your capital gains)

See the full table of these benefits'. 'below:

Additional tax

Additional tax is levied on top of the basic rate of value added tax and social contributions on higher profits - value gains of more than €50,000.

• For capital gains between €50,000 and €100,000 you will pay an additional 2%
• For value increases between € 100,000 and € 150,000 you will pay an additional 3%
• For value increases between € 150,000 and € 200,000 you will pay an additional 4%
• For value increases between € 200,000 and € 250,000 you will pay an additional 5%
• For increases over € 250,000 you will pay an additional 6%

How to calculate capital gains tax in''amount of profit. This figure is determined by subtracting the acquisition cost (the price you paid for the property, including extras, notary fees or VAT) from the transfer value (the price at which you sold the property), deducting any selling costs and VAT.

In addition, deductions of 7.5% are available for acquisition costs, improvements and loan interest, but all are subject to certain conditions and proof is required. Because of the above, the amount of net appreciation subject to income tax may differ from the amount of net appreciation subject to social security deductions.

As you may already realize, the calculation of value gains tax in France is extremely''is complex, and there are additional deductions and conditions you may need to take into account that are not covered in this article.

Evaluate your tax liability on capital gains in France

The above figures are a good place to start when assessing your liability for capital gains taxes, but given the many different factors involved, they may not give the full picture.

Before you meet with a notary, you can also run a simulation on Notaires.fr - their highly accurate calculator for'The 'calculating taxes on capital gains in France is quite a useful tool. For more accurate advice in your situation, especially if you have more than one property or have overseas properties, it is advisable to seek professional help. Check out our list of recommended international tax advisors.

Do I have to pay capital gains tax in France as a non-resident?

Yes.If you have a second home or holiday cottage in France, you will be liable to pay French capital gains tax on the sale of your property, even if you are a tax resident of another country. Non-residents are subject to the same 19% rate of capital gains tax as residents. Non-residents are also subject to''the same 17.2% social contributions as residents. However, it is important to note that there is an important exception for residents of EU and EAEU countries and the UK after Brexit. Residents of these countries who are social insurance participants in the EU/EAEC/UK system are exempt from paying CSG/CRDS taxes. However, they will still have to pay a 7.5% solidarity tax.

Value gains tax for UK citizens and residents after Brexit

Despite some confusion over this rule for UK sellers after Brexit, it has now been confirmed that UK residents who meet certain conditions are still eligible for the CSG/CRDS exemption. To find out more about''That said, check out our guide to low-level investment and capital gains tax after Brexit: 17.2% or 7.5%? Nex question: Do I Need to Pay Capital Gains Tax in France as a Non-Resident?

Do I have to pay Capital Gains Tax in France on my UK or US property?

If you are a French resident and you are selling a second home in the US, UK or another country, it is important to note that you will also be liable to pay French capital gains tax. However, as with the sale of French property by non-residents, you will usually be given a tax credit in France on the sale of your property abroad. This is subject to double taxation between the two countries and it is important to ensure you understand your obligations in both''countries.

Payment of GST in France: all property sales in France must go through a notary and it will be the responsibility of the notary to calculate the amount of GST payable. They will hold the amount payable at the time of sale and ensure that all taxes and social contributions are paid on your behalf.

If you are not resident in France and live outside France, in the European Union, Iceland or Norway, you must also hire a fiscal representative accredited by the French tax administration who will be responsible for your declaration of value added tax.

Paying taxes in France: Whether you're moving to France, owning French real estate''or your existing business interests, assets or investments in France - FrenchEntrée is here to help answer all your tax questions. Our 'Table of Contents' articles will provide you with all the basics, from income tax and social contributions to property and estate taxes. However, the international tax regime can be complex, so if in doubt, it is always advisable to discuss your personal situation with one of our recommended financial or tax advisors.

Disclaimer:

This material is provided for information purposes only and is not intended as a substitute for professional advice on any aspect of tax planning or tax liability''in France. FrenchEntrée cannot be held responsible for the consequences of decisions or actions you may take in relation to declarations or tax liabilities in France.

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