 |
 6th September 2010
|
 Is your French home subject to Capital Gains Tax? This is one of the most frequent questions asked by British expatriates.The basic principal is that property in France will always be potentially subject to French capital gains tax, irrespective of your place of residence. As in the UK, however, your “principal residence” is exempt from capital gains tax, so this is a major advantage. One of the most frequent misunderstandings is caused by the fact that you can only call your “home” your “principal residence” if you are formally tax resident in France. Barring any very specific exceptions, covered by the Double Tax Treaty, your residence of France begins from the date that you move to France with the intention of living here. Accordingly, it is perfectly logical to assume that your French home becomes your “principal residence” from that date. However, many people have already been subjected to the actual practical guidelines laid down for the Notaires, who are responsible for deciding whether capital gains tax is payable, and for eventually collecting that tax. The guidelines logically state that, unless you can show that you are paying taxes in France, your French “home” cannot be your principal residence. In practice, the problem is that, until that person has actually submitted his/her first French income tax return (which can be anything up to 17 months after your actual arrival), the person is not actually registered in the French tax system, as a French tax payer. Hence, were the person to sell this property before making their first tax declaration in France, if the Notaire wants to deduct French capital gains tax from the proceeds of the sale, in respect of any gain made by the seller, he is perfectly able to do so. In fact, the actual guidelines, originally received by the Notaires, recommended that two tax returns be obtained, so as to ensure that the seller had been resident in France for at least a full tax year, but this guideline does not appear to be applied in practice. If you are subject to capital gains tax on a property sale, how is the tax calculated? The basic rules are that the purchase price can be revalued, by purchase and sale costs and any major renovation bills, however, there is no allowance for inflation. The resulting figure is subtracted from the sale price to calculate the taxable gain. The gain is then taxable at a set rate of 16%, for European residents, with an a extra “social tax” (a form of National Insurance Contribution) of 12.1% for French residents. Anyone who is not a resident of a European State will pay a set tax rate of 33.33%. However, the conditions of acceptance of “renovation work” are very stringent. This must be carried out by a registered French artisan ( with an appropriate invoice) and invoices for materials you have purchased yourselves are not allowed. In the event that you cannot produce invoices for renovation work carried out, and if you have owned the property for at least 5 years, however, the Notaire can apply a fixed abatement of 15% of the acquisition price in respect of improvement works on the building ( but not on the land). Unfortunately, the previous possibility that you could have an “expert evaluation” of the work done, instead of producing invoices, no longer exists, so capital gains, for the “bricoleurs”, who have done all the work themselves, is now much more of a problem. Even so, all is not lost, since there has always been a significant allowance given for the length of time you have owned a property, which has seen major changes in recent years. There is no allowance for the first 5 years of ownership, but every year, from then on, allows you 10% off your capital gain, with the result that a property owned for more than 15 years is free of capital gains tax. Whatever your situation, these rules show that the tax position of a British resident in France is always going to take some understanding. Taking professional advice has become even more important. Daphne Foulkes Daphne Foulkes lives in the Aude and is the Area Manager for the Midi-Pyrénées and Languedoc Roussillon with Siddalls France www.siddalls.fr and can be contacted directly by e-mail at daphne.foulkes@siddalls.net or by telephone on 04 68 69 04 23. Financial solutions for your life in France Siddalls France SASU, Parc Innolin, 3 Rue du Golf, 33700 Mérignac - RCS BX 498 800 465 C.I.F. No E001669 auprès de ANACOFI-CIF association agrée par l’Autorité des Marchés Financiers (AMF) et Courtier d’Assurances, Catégorie B - ORIAS 07 027 475 Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier et L 512-6 et 512-7 du Code des Assurances.  French capital gains tax – how it works French Taxes – what has changed? Tax Zone Home Page 
Looking for a property in France? Use FrenchEntrée's Property Finders to help you find your property and to help you through the buying process  |
What about Wealth Tax?
 What is it? Will it apply to your purchase? Find out more on this, and inheritance and capital gains tax, by clicking here
Fed up of high UK taxation?
 Speak to the tax experts at Blevins Franks to explore your tax saving options in France.French Tax Services
 Take the headache out of French taxation and contact La Belle Vie today. From pre-purchase advice and assistance to the preparation of French tax returns, La Belle Vie is here to help.
Financial advice & solutions for people relocating to France
 Download Siddalls help sheets for "your new life in France" by clicking here.Save a fortune on currency exchange
 If you need advice or a currency exchange quote, make a no obligation enquiry to Moneycorp, FrenchEntrée's Currency Partner. Apply now to open a currency accountF A Q Legal Process  Listing French legal & tax advisersClick the links to find your suppliers Legal advisers Tax advisers |
  Choose Channel
 Search FrenchEntréeFrench Property Database Search
Over 12,000 properties for sale throughout France..... More search options Use a property finder Delay to new tax treatyThe new double taxation treaty between France and the UK will be delayed... more... |