Currently Capital Gains in relation to immovable property (except the main residence) are taxed in France at a rate of 16% plus 12.1% social charges. These rates apply after deduction of the 10% allowances for each year of ownership after the first five years. After 15 years, the gain is free of tax and social charges.
An amendment was adopted by the National Assembly during the course of their examination of the 2011 Finance Bill. If amendment is agreed by the Senate, it will increase the tax payable on capital gains concerning immovable property.
Probable Regime from 1st January 2011
The measure voted on the 21st October proposes an increase in the rate of tax from 16% to 19%. Social charges on property gains will increase from 12.1% to 12.3%. Whilst the tax will still be calculated after the 10% deductions for length of ownership, the social charges will be calculated on the total gain before taking account of such allowances.
Therefore, where a property is sold after 15 years of ownership, the individual will not have any tax to pay, but they will still pay social charges of 12.3% on the full gain. The gain is taken into account when looking at taxable income for the purposes of the Bouclier Fiscal, but the amount taken into account will be the full gain before any allowances (previously it was just the taxable gain after allowances).
If these measures are adopted by the Senate, they will affect individuals who sell their property after 1st January 2011. Therefore, if a sale is on the cards, the Acte Authentique should be signed before 31st December 2010 in order to benefit from the current rates.
Peter Elias www.allez-francais.com
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