Three unknown ways to avoid estate tax on real estate gains

In France, it is possible to avoid paying tax on property gains. And this does not only apply in the case of the sale of a main residence. Many people know that real estate gains derived from the sale of a main dwelling are not taxable. But it is important to note that it must be a valid main dwelling: if the accommodation is temporary, it will be considered as a secondary dwelling and tax will be levied on the capital gains.

The same applies if your property was not occupied on the day it was sold; you will need to prove that it was occupied before it was listed for sale and that the purchase agreement was signed within a reasonable period of time (usually a year). If you own and occupy a service dwelling, you also qualify for an exemption from real estate appreciation tax if your spouse and children actually live in the primary residence.

Another well-known loophole is the possibility of obtaining a full exemption from capital gains tax if you have owned a property for at least 30 years, regardless of its type (whether it is a building or just a plot of land). Before the 30-year period expires, you can benefit from reduced tax rates calculated according to the number of years of ownership, both in terms of tax and social security contributions:

• 6% income tax reduction from the 6th through the 21st year of ownership, and 1.65% social security deductions;
• 4% reduction in income tax for the 22nd year and 1.60% social contributions;
• tax exemption and 9% reduction in social contributions after the 22nd year.

The other three grounds for exemption from real estate appreciation tax are less well known.

Gains from the sale of real estate that do not exceed €15,000 are also exempt from tax. Regardless of the amount of the gain in value received, it is always exempt from tax if your share of ownership does not exceed €15,000. This may be the case of spouses, owners of onerous and bare ownership or multiple co-owners.

Finally, it is possible to avoid real estate gains tax for non-residents when selling a main residence in France. However, the place of your next purchase should not be considered a tax haven and you must meet two conditions: the sale of your property must be made no later than December 31 of the civil year in which you make your departure; the home must not have been rented or made available for use during this time.

A non-resident may also be exempt from capital gains tax on the sale of real estate that is not his or her principal residence in France, but with a limit on capital gains up to €150,000. To qualify, you must have been a tax resident of France continuously for at least 24 months (at any time prior to the sale) and the sale must occur no later than December 31 of the 10th year following the tax resident's move outside France (if you have had full possession of the dwelling at least since January 1 of the preceding year of sale, there is no time requirement).

Bureaucrats and employees of the three public services who work abroad but are tax residents of France can also benefit from this exemption, with a limit on the increase in value to €150,000.