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French Taxation

Capital Gains Tax on Former Residents

Tuesday 07 October 2014

The capital gains tax exemption limit on the sale of a property in France by former residents has been clarified, to the benefit of owners.

Although the sale of a second home in France is subject to capital gains tax, there is a specific exemption to certain non-residents who were previously resident.

This exemption is currently subject to three conditions:

  • That you are national of the EEA, although the administrative regulations also suggest nationals from outside of the EEA would also be eligible on a conditional basis.
  • That you were previously tax resident in France for at least two years.
  • That the property had been freely available for your use since 1st January in the year preceding the sale.

Last year, as part of the Finance Bill 2014 the government accepted an amendment to these rules, which both liberalised and restricted the exemption.

In effect, the condition relating to the property being freely available was abolished, provided the sale transfer took place within 5 years of your departure from France.

In addition, even this five year rule no longer applied, provided the seller had the property at their disposal since 1st January in the year preceding the sale.

However, some tightening of the exemption from capital gains tax was also introduced, restricting it to a maximum of €150,000, after deduction of all other allowances.

The government have recently published the detailed regulations on this exemption limit, which provides that it applies to each owner of the property.

Accordingly, a non-resident couple who sold a former principal home in France would be entitled to a total exemption from capital gains of €300,000.

If there were four owners the exemption limit would be a whopping €600,000.

Nevertheless, no exemption at all applies if the property is held through a Société Civile Immobilière (SCI).

The rule applies for all sales with effect from 1st January 2014.

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