Capital gains tax on French property
The real estate capital gain is equal to the difference between the sale price and the purchase price or the declared value, when the property has been received by donation or inheritance .
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Determination of capital gains tax
Capital gains : calculation basis
The capital gain is equal to the difference between the sale price (less costs to sell and the amount of VAT paid) and the purchase price (including premium actually paid registration fees when buying or a flat rate of 7.5% of the purchase price) or the declared value when the property was received by gift or inheritance (plus actual expenses and any inheritance rights if they were supported by the donee or ' heir ).
The repairs and improvements
The purchase price may be increased construction expenditures, reconstruction, expansion or improvement if they were supported by the vendor and built by a company in the supporting statement of reserves (invoices subject to VAT. (Note: materials and work done by the owner itself are not deductible). It takes more they have not already been taken into account in determining the income tax (including deduction for property income) and do not have the character of rent expense (CGI, art. 150 VB II, 4°).
The work considered in determining real estate capital gains are defined in the same way as those taken into account in determining taxable income property.
Can only be taken into account in the gross expenditure purchase price made since the completion of the building or its acquisition if later..
In all cases, the expenses of maintenance and repair, including major repairs, are not included among the expenses that can be taken into account for calculating the capital gain. They include those which correspond to work intended to maintain or restore a building in good condition and to allow normal use.
Spending increase coming in the purchase price must be justified (CGI, art. 150 VB II). However, the evidence supporting the work are provided only on request of the administration (CGI, Sch. II, art. 74 SI). (CGI, ann. II, art. 74 SI).
Alternatively, the seller can increase by 15% the acquisition value if it is owner for over 5 years, at a flat rate, without having to establish the reality of the work, the amount of work actually carried out or its inability to provide supporting (CGI, art. 150 VB II, 4°). There is no need to consider whether spending work has already been taken into account in the assessment of the tax on income. 15% of the package is a simple option for homeowners taxpayers well over five years. It does not stack with actually borne by the owner costs.
While many works were carried out in the second home, the notary advise to keep all invoices for the purchase price may be subject to an increase in the amount of actual expenditure of work whose invoices have been preserved. Otherwise, only the flat-rate increase of 15% may be applied without justification if the property is held for at least five years.
The allowance for holding period:
The rate and pace of abatement for holding period is different for determining the tax base for the income tax and social contribution.
|Holding period||Applicable abatement rates each year detention
Tax base on income
|Applicable abatement rates each year detention
Base for social contributions
|Under 6 years||0 %||0 %|
|From the 6th to the 21st year||6 %||1.65 %|
|22nd pass year||4 %||1.60 %|
|Beyond the 22nd year||Exemption||9 %|
|Beyond 30th year||Exemption||Exemption|
Thus, the real estate gain is exempt:
- after 22 years in possession for income tax,
- after 30 years in possession for social contributions.
Detention Years are counted since the anniversary of the acquisition of the property (purchase date, date of the gift or date of death)
Exceptional allowance, subject to conditions, on capital gains resulting from the sale of real estate or building land:
In accordance with the provisions of II of article 28 of the law n ° 2017-1775 of the December 28, 2017 of amended finance for 2017, an exceptional tax allowance applies, under conditions and temporarily, for the determination of the net capital gains, both on income tax and social security contributions, resulting from the transfer of building land or built real estate, or rights relating thereto.
Capital gains resulting from the sale of building land or built-up buildings intended for demolition for the purpose of reconstructing one or more collective residential buildings located in geographical areas characterized by a particularly imbalance between the supply and demand for housing, are determined after applying an exceptional allowance of 70% or 85% under the dual condition that the transfer:
- preceded by a unilateral or synallagmatic agreement to sell signed and having acquired certain date from January 1, 2018 and no later than December 31, 2020;
- be made no later than 31 December of the second year following the year during which the unilateral or synallagmatic agreement to sell has acquired certain date. In practice, the exceptional allowance may therefore apply to sales completed until December 31, 2022.
Tax rates on capital gain:
The capital gain is taxed under the income tax at the current flat rate of 19% (with a linear reduction of 6% from year 6) and on social levies current rate of 17.2% (with a taper relief from the 6th year).
The amount of tax will be charged by the notaire on the sale price at the signing of the deed and paid by it to the tax authorities.
An additional fee (from 2 to 6% depending on the amount of surplus value after application of the deduction) applies on real estate gains, other than on building sites, an amount exceeding €50,000. Capital gains are concerned resulting from disposals since 1 January 2013. (CGI Art. 1605 nonies).
The capital gains tax varies according to the selling price, the nature of good, and the holding period. The principle of tax exemptions are cases specifically provided.
The capital gains tax exempt property
Property sales escaping the tax on real estate gains are recorded in the II et III de l’article 150 U CGI.
In particular, exempt:
- The sale of the principal residence and its immediate dependencies needed and sold simultaneously or nearly simultaneously;
- The sale of a right of raising the conditions of the article 150 U II-9 CGI ;
- The sale of a property located in France by non-resident taxpayers under certain conditions (CGI art. 150 U II-2 à 9 et III)
- The capital gains realized on the occasion of the sale of goods for a price less than or equal to €15,000 for a single person, €30,000 for a couple;
- Those carried out on the occasion of the sale of property held for over 30 years.
- The sale of a property in the case of expropriation under the terms of reinvestment (CGI art.150 U II-4)
- The sale by retired or disabled modest (CGI Art. 150 U III)
Taxpayers who do not own their principal residence, may benefit from exemption from capital gains realized on the first sale of a dwelling under certain conditions:
- The transferor was not the owner of his residence, directly or through intermediaries, in the four years preceding the sale (CGI, art. 150 U II, 1°bis, al. 1er) ;
- The transferor must proceed to reinvest the proceeds of sale " within twenty-four months from the disposal, for the acquisition or construction of a dwelling which affects upon completion or acquisition if later, at his main residence » (CGI, art. 150 U II, 1° bis, al. 2 - in limine).
In case of breach of any of these conditions, the exemption is challenged under the year of the breach. (CGI, art. 150 U II, 1° bis, al. 2 - in fine). More information on the Official Bulletin of French Public Finance Tax.