11. French Capital Gains Tax
- Scope of the Tax
- Exemptions on Sale of Property
- Allowable Costs on Sale of Property
- Shares and Personal Possessions
- Taxation of Building Land
- Fiscal Representative for Non-Residents
11.1. Scope and Rates of French Capital Gains Tax
Capital gains tax in France is called impôt sur les plus values and is a tax payable on the sale of land or buildings, on shares, and certain other personal property, subject to any exemptions, allowances and deductions that are available.
We can distinguish three different terms used, depending on the type of transaction:
- Land and Buildings - Impôt sur les plus values immobilières.
- Personal Property - Impôt sur les plus-values biens meublés.
- Shares - Impôt sur les plus-values mobilières.
11.1.2. Taxable Persons
Both individuals and companies are liable for capital gains tax, although there are different rules that apply.
In this review we focus on capital gains tax as it applies to individuals not as it applies to property held within a company, such as a Société Civile Immobilière (SCI) or to those who buy and sell property as a business.
However, you can read more about the taxation and other implications of buying and selling property held in an SCI in our Guide to Société Civile Immobilière (SCI).
Transfers of real estate are fully liable to capital gains tax, including exchange properties and those sold on the basis of a life annuity rather than a capital sum.
Conversely, properties that are gifted are not liable (although they may be subject to gifts tax) and property that is inherited is similarly exempt (although it is subject to inheritance tax rules).
11.1.3. Taxable Property
The main home is exempt from capital gains tax.
Only if the property is a second or holiday home, or a property you rent that you subsequently sale are you liable for capital gains tax.
In addition, if you become permanently resident in France, and then subsequently sell your former home or other property, you could become liable for French capital gains tax on the sale proceeds.
Whether you are liable will once again depend on the terms of any double taxation treaty between France and your home country.
In the case of former residents of the UK resident in France a tax treaty signed between France and UK, operative from 1st January 2010, makes you liable for capital gains in France on the future sale of your former home. The tax is based on your Euro gain, not on your Sterling gain.
You will be entitled to the same relief on French capital gains tax as you would otherwise receive if the property was located in France. On that basis you will be entitled to relief based on the duration of ownership.
The 2010 treaty overturns a previous rule in which there was an exemption from capital gains tax by the UK tax authorities on the disposal of the main residence for a period of five years, and which was also exempt from capital gains tax in France.
In addition, since 2015, the UK has also imposed capital gains tax on the sale of property of former residents (Non-Resident Capital Gains Tax - NRCGT).
Nevertheless, only any gain since April 2015, and the final 18 months of ownership, normally qualifies for private residence relief. This period was reduced to nine months from April 2020.
A tax free allowance of £12,500 (2020/21) also applies.
As a non-resident of the UK you can use the calculator provided by HMRC to determine your liability.
In 2019, NRCGT was extended to include commercial property and land in the UK, as well as property 'entities', unless an exemption applies, with tax applied on gains since April 2019.
Separately, the Lettings Relief in the UK (previously worth up to £40K per person/property) will be reformed so that it only applies in a very limited number of circumstances.
Individuals with pay at the rate of 18% or 28% on net gain, depending on their UK income tax bracket.
11.1.4. Basic Rates
The applicable tax rate for gains on real estate will depend upon:
- Your country of residence for taxation purposes;
- The size of the capital gain;
- Exemptions and allowances to which you may be entitled.
In general, most countries have a taxation treaty with France under which capital gains on the sale of property in France is taxed in France, with full or partial relief against liability in your home country.
In relation to those resident in the UK a liability does arise in the UK, but with any French tax paid set off against tax that may be due in the UK. Capital gains are declared using HMRC Form SA108 and you claim any French capital gains tax paid as a credit against any UK capital gains tax due using Form SA106 "Foreign", with the assistance of Helpsheet 261.
You are also able to deduct from the gain allowable costs of purchase and sale and expenditure on property improvements.
If the capital gains tax due in the UK is in excess of that paid in France you will be liable for the difference. If the tax due in the UK is less than that paid in France, you will have nothing more to pay, but you will not get a refund of the tax you have already paid in France.
The various basic rates of capital gains, depending on your residency, are shown below. The rates are those that apply before exemptions and allowances, which are considered in subsequent pages.
i. Resident of France
If you are a resident of France then the applicable basic tax rate is 36.2%.
This sum comprises capital gains tax at the rate of 19% plus 17.2% social charges.
However, residents in France from the EEA who are not affiliated to the French social security system are now exempt from the social charges, but subject to a 'solidarity tax' (prélèvement de solidarité) at the rate of 7.5%.
This clearly applies to residents who are in receipt of an S1 certificate of health entitlement.
As a result, those to whom this rule applies pay a combined rate of 26.5%.
Since 2015 there is no longer a higher rate of capital gains tax for non-residents who live outside of the EEA.
Accordingly, if you are not resident in France the applicable basic tax rate is the same - 19% CGT plus 17.2% social charges, giving a total charge of 36.2%.
Once again, non-residents from the EEA benefit from a lower rate, as they are also exempt from the social charges, but pay the solidarity tax of 7.5%.
11.1.5. Supplementary Tax
In addition to the basic rates of capital gains tax, since 1st January 2013 a supplementary rate of tax is also payable on large gains. (Article 70, troisième Loi de Finances Rectificative 2012)
There are five rates of taxation, depending on the size of the gain.
The following table shows a breakdown of the thresholds at which the supplementary tax is triggered and the rates that apply.
|Amount of Gain||Rate|
|Greater than €50K up to €100K||2%|
|Greater than €100K up to €150K||3%|
|Greater than €150K up to €200K||4%|
|Greater than €200K up to €250K||5%|
|Greater than €250K||6%|
For each tax band there is a dampening mechanism to reduce the level of the charge for the first €10,000 of gain in that band. Your notaire will advise you on the precise calculation.
Liability to the tax depends on the number of owners, as the calculation of the gain is divided between the owners. Accordingly, two 50/50 joint owners who make a €99,000 capital gain would not pay the supplementary tax as the gain for each is less than €50,000.
This supplementary tax does not apply in relation to building land, although other taxes are potentially liable, as we state in Section 11.5.
In all cases of the sale of real estate in France the tax is applied at the time of the sale in the offices of the notaire, and will be deducted from the sale proceeds before the cheque is handed over.
Non-residents from outside of the EEA are also required, in certain circumstances, to appoint a tax agent on the sale of property, about more of which you can read at Fiscal Representatives.
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