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
- Sale of Property Abroad
11.6. Fiscal Representative for Non-Residents
French laws require that certain non-resident sellers are obliged to appoint a représentant fiscal (tax agent) on the sale of property in France.
Separately, it also applies to certain commercial activities undertaken by foreign based companies.
The role of the tax agent is simply to verify that the correct amount of tax is being paid on the transaction.
Given that this also happens to be the role of the notaire there does seem to be a degree of duplication in this task!
ii. Who is Liable?
It applies to all non-residents from outside of the EEA.
Since 2015, following a judgement in the European Court, EEA residents, as well as residents from Iceland and Norway have been exempt.
Since 1st January 2021, UK residents are no longer exempt, due to Brexit.
The requirement to appoint an agent applies even though there may be a loss on the sale of the property.
iii. How Much Does it Cost?
There are no fixed tariffs for this 'service' and very little transparency from tax agents about them. The charges are sometimes quite eye-watering.
Expect to pay around 0.4% to 1% of the selling price of the property.
Mercifully, the fee is deductible from the capital gain, although this is not of much use if you are selling at a loss (not uncommon).
iv. Tax Agents/Représentant Fiscal
These tax agents are accredited private companies and, as they are relatively unknown to non-residents, they are frequently appointed by the notaire at the time the sale takes place, sometimes without the consultation or even the knowledge of the seller.
Notaires generally use a tax agent with whom they are accustomed to work, without any competitive process, so they may not be the cheapest or most appropriate agents for your sale.
You are not obliged to accept the choice of the notaire, and we would strongly advise that you consider carefully their choice or recommendation.
That said, there are not many of these companies around, so the choice is limited. Whatever price you are offered, you should consider trying to negotiate on the price, particularly if the sale value of the property is high or the transaction is simple, eg no deductible building works, or capital loss.
There are several companies on-line who claim they are accredited but this is not the case. Some are only accredited for VAT, whilst others claim accreditation, but sub-contract the work to an accredited company. That results in an increased charge to you.
There is a huge lack of transparency about the way these companies operate, and you will find few details about their fees and practices on-line. In some cases not only does the agent charge a fee, but they also withhold a percentage of the proceeds of the sale in escrow, for several years, as a guarantee against fraud by the seller.
One requirement that some agents impose on EEA (and UK) non-residents is to provide proof of affiliation to a health and social system outside of France. This is in order to obtain the lower rate of social charges. We are aware of several cases where the agent has not accepted the proof that has been provided and as a result the notaire has been instructed to hold monies in escrow.
Unfortunately, as the tax agent is liable for any incorrect tax assessment that may be made, some take a most cautious view of the calculation. This is particularly relevant to deductions being sought for building works.
Some tax agents also have a very restrictive view of what are deductible, eligible building works. This is because not all building work is deductible from capital gains, a topic we consider in some detail in the section Allowable Costs on Sale of Property.
Notably not deductible are maintenance and repairs, including major repairs, with the administrative doctrine stating: 'Les dépenses d'entretien et de réparation, y compris les grosses réparations, ne figurent pas parmi les dépenses pouvant être prises en compte pour le calcul de la plus-value.'
As a result, it is imperative you have full and correct paperwork for the works. The invoices must be without error, eg, address, name. Use only the address of the French property on the invoices, not your home address in the UK. If you have used a builder not registered in France that is often a problem. Once again, the law does not require that it must be a French registered company, and, indeed, to insist on this requirement is contrary to European law. Nevertheless, we are aware that tax offices reject the works if a France registered company is used. If this occurs, you should challenge the decision.
You should also keep proof of payment, which should be in the form of bank statements and invoices. Unless you have the bank statements to confirm payment, you will not get the relief. The supply of old bank statements is a particularly onerous requirement and one with which many owners are unable to comply. We consider the requirement excessive and one you should consider contesting with the tax authority. You can contact us on the mail address below about this issue. See also French Tax Complaints.
The law does permit the buyer to act as the tax agent, provided they are France resident, but this is extremely rare, due to the contingent liability that arises for them.
In addition, any other third party who is France resident may do so, subject to accreditation by the tax authority, who will wish to be satisfied as to the guarantees they are able to offer. Notaires and avocats are expressly not permitted to act.
We have held discussions with several of the accredited tax agents to be able to offer to our readers a competitively priced, flexible, English language service, in which the requirement for banks statements can sometimes be circumvented. If you might be interested in the service, contact us for details at Tax Agent.
There is dispensation from the need to appoint an agent where either:
- The sale value of the property is less than €150K per seller;
- The property was the former principal residence of the seller(s) and property was sold no later than 31st Dec of the year following the sellers becoming non-resident and that the property was not let to a third party;
- State retired persons with an income that would entitle them to exemption from the taxe d'habitation as they are not liable for capital gains tax.
- Where the property has been owned for at least 30 years, which grants full exemption from capital gains tax and social charges.
A married couple or those in a civil partnership area considered to be a single household for the purposes of determining the threshold. The administrative doctrine states: 'Pour un couple marié, quel que soit son régime matrimonial, le seuil de 150 000 € s'apprécie par rapport à la totalité du prix de la cession, de sorte que le couple est considéré comme un seul cédant. Il en est de même pour des personnes ayant conclu un pacte civil de solidarité (PACS) soumises à une imposition commune.'
Where the sellers are not married or in a civil partnership, and the property is held ‘en indivision’ then the threshold is appreciated by the proportionate ownership of each ‘indivisaire’.
The €150,000 threshold is assessed solely in relation to the transfer price corresponding to the property or property rights as stipulated in the deed.
Thus, when the price stipulated in the deed includes the commission paid to an estate agent, the amount of their commission cannot be subtracted from the price in order to assess the threshold. On the other hand, for the calculation of the capital gain, this amount may be deducted from the sale price.
In the case of a deed concerning the simultaneous transfer of real estate and fixtures and fittings, the part of the price of the F&F is not taken into account to establish whether the transfer is less than or equal to €150,000, provided that the value of the F&F can be justified by invoices or a valuation.
Private companies registered outside of the EU are always required to use a fiscal agent.
Where the property is owned by an SCI, if the sale value of non-EU resident owner(s) is greater than €150K, that part of the transaction requires a tax agent.
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