11. French Capital Gains Tax

1. 11.1. Real Estate Exemptions
   11.2. Real Estate Deductions
   11.3. Tax Rate
   11.4. Shares and Other Property
   11.5. Development Land
   11.6. Your Former Home

11.2. French Real Estate Deductions

The capital gain is determined by the difference between the sale price (less eligible expenses) and the purchase price (less eligible expenses).

The sale price is the price stated on the transfer, plus any estate agent fees, mandatory survey fees (lead, termites, asbestos etc), and any costs that may be associated with repossession proceedings.

The purchase price is the price on the transfer, plus notairial costs and taxes at the time of purchase, and costs associated with the construction, enlargement or improvement of the property.

This means, of course, that the costs of repair and maintenance cannot normally be taken into account. Just what is 'repair' and what is 'improvement' is not always a point easily determined.

As these matters are not precisely defined, in some measure it depends on just what the notaire is prepared to accept as eligible building costs. You may wish to arrange a meeting with a local notaire to discuss.

The general evidence suggests that the French authorities are only prepared to accept invoices from France registered building professionals. This may be a moot legal point, as there are many commentators who consider that bon-fide invoices from companies registered elsewhere in the EU should also be permitted.

You will be required to produce invoices in support of any building costs. In the event that these are not available then, provided you have owned the property for at least five years, the notaire is able to apply an allowance of 15% on the acquisition price against improvement works on a property (but not land).

This concession applies even though you may not have actually carried out any major works.

If the property has been previously rented out on a tenancy, and construction or renovation costs have already been granted specific relief against liability to income tax on the rental income, then these costs will not be eligible.

Indeed, it would appear that even those who have adopted the micro tax status for lettings (in which a standard allowance for costs is granted) would be ineligible to claim building costs against tax liability.

Likewise, if you have been granted income tax relief for the installation of energy conservation or other works, you will not be able to set this off against tax liability.

There is a general allowance of €1000 per year against capital gains. The general allowance is doubled for a property owned by two people.