Both residents and non-residents pay capital gains tax on French property, but the main home is exempt and tax can be reduced on second homes.
Updated 3 August 2017
If you are looking to buy a property in France, or already own one, you need to know what tax to expect when you come to sell it. You will be liable to French capital gains tax whether you are a resident or non-resident of France.
If you are a French resident, you will also have to pay the tax on any property you sell, whether it is in France, the UK or elsewhere. The full gain is taxable, even if you bought the property long before you moved to France.
Gains on property are taxed at a fixed rate of 19%. You currently have to pay surtaxes as well, ranging from 2% for gains over €50,000 up to 6% for gains over €250,000. You also have to pay social charges, at a rate of 15.5%. This makes a total top tax rate of 40.5%.
You should always take personalised capital gains tax advice for your circumstances.
Contact one of our advisers.
Capital gains tax exemptions
The good news is that the main home is exempt from tax, provided the property is your habitual and actual residence at the time of sale. This is true even if you owned the property for many years without living in it; it will still be fully exempt from tax if it is your habitual home when you sell it.
This exemption is unlikely to be available to you if you have lived in France without being fully integrated into the French tax system and registered for tax purposes.
If you leave a property without having sold it, you could lose the relief completely, even if you had previously lived in it for many years. However, the main home exemption can apply for up to 12 months after you move out, as long as you had put it on the market while you are still living in it and it is vacant – ie unused and unlet when sold. There are various terms and conditions, so make sure you understand how they apply to you.
The main home exemption may also apply if the property is held in an SCI (‘Société Civile Immobilière’), which is a French property holding company – whether the property itself is sold, or the shares of the SCI. Professional advice should be sought.
Second homes are fully liable to capital gains tax. However, a taper relief system will lower the amount of tax and social charges due. You receive full income tax exemption when you have owned a property for 22 years, with the net gain reduced by 6% per year from the sixth year onwards and 4% for the last year.
For social charges you need to wait 30 years for full exemption. Again the relief starts from the 6th year, but is weighted towards the last seven years.
France also provides an age-related exemption. If you are in receipt of a state pension or hold an invalidity card, you do not pay capital gains tax on the sale of real estate if:
(1) You do not have a liability to wealth tax in the tax year preceding the year before sale, and
(2) Your taxable income in that tax year was below a certain level. For 2016 gains the 2015 income limit is €10,686 for the first part of the household, and €2,853 for each additional half ‘part’. So for a married couple the income limit would be €16,392.
In some circumstances property that is not the main home may also escape capital gains tax. This will apply if you did not own a main home during the preceding four years, and you reinvest the proceeds to buy or construct a main home.
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Selling UK property
If you sell UK residential property while resident in France, you are liable to capital gains tax in the UK under the same rules applied to UK residents. However, it is only the gain since 6th April 2015 that is taxed.
The gain is also fully taxable in France, though under the UK/France double tax treaty you receive a credit in France for any UK tax paid on disposal. French residents also pay the 15.5% social charges on gains arising on UK real estate. In this case, there is no UK equivalent to get a credit for.
Capital gains tax in France for non-residents
UK-residents owning French property are fully liable for French and UK tax on its sale. Under the terms of the France/UK double tax treaty, the tax paid in France is offset against that due in the UK. If the UK tax bill is higher, you will pay the difference in the UK. Social charges are also payable in France at 15.5%, but cannot be offset against the UK capital gains tax liability.
As always with French tax, it can be more complicated than first appears, so seek professional tax advice to establish exactly what your tax liabilities are and what tax planning opportunities are available. This also applies to selling a UK property as part of your move to France. If you have not moved yet, seek advice before you sell in the UK and buy in France.
Any questions? Ask our advisers for help.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
