As in the UK, your “principal residence” is exempt from capital gains tax, so only people not meeting this requirement are impacted by CGT. However, one of the most frequent problems is that you can only qualify your “home” as your principal residence if you are formally tax resident in France. It will not qualify if you have been living in the property for some time, but have never entered the French tax system, nor completed a tax return.
The basic rules are fairly simple in that the purchase price can be revalued, by purchase / sale costs (agency fees, Notaires fees & specialist reports), and any major renovation bills, but there is no longer an inflation allowance. The resulting figure is subtracted from the sale price to calculate the taxable gain.
The gain is then taxable at a set rate of 16%, for European residents, with an a extra “social tax” (11% this year) for French residents. Anyone who is not a resident of a European state will pay a set tax rate of 33%.
You need to be aware that the conditions for the acceptance of “renovation work” are very stringent. The works must have be carried out by a registered French artisan (with an appropriate invoice) and invoices for materials that you have purchased yourselves are no longer allowed. One further expense for sales in excess of 150,000 Euros is the need to appoint an official “fiscal representative”, who is responsible for calculating and paying the tax on your behalf. They typicfally charge 1% of the sale value.
There is a significant allowance given for the length of time you have owned a property, after the first 5 years of ownership, as from then on, you are allowed 10% off your capital gain, for each complete year of ownership, with the result that a property owned for more than 15 years is free of Capital Gains Tax.
See also an article on our library pages http://www.allez-francais.com/lib/sa1204_05.htm
Peter Elias (Agent Commercial), La Moinerie, 79500 Paizay le Tort, Deux-Sèvres, FRANCE
Tel: 00 33 (0)5 49 27 01 22 Mob: 00 33 (0)6 62 28 02 25
Tel: 0871 717 4176 (UK) Fax: 0870 458 1804 (UK)
E-mail: allez-francais@wanadoo.fr
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