Reader question. For several years we have rented out part of our home in France as a seasonal holiday let. We want to downsize but have discovered that we may be subject to capital gains tax (CGT) even though it is our main residence. We bought in 1999 and moved in permanently in 2023. How long, after saying goodbye to our last guests, do we have to wait before we can sell without incurring CGT?
The principal issue which arises here is that the exemption that exists from French capital gains tax on selling the main home does not apply to a property that is used for letting.
If the tax office thinks a property is used for letting, then the ordinary CGT regime is liable to apply as for a second home. The rules are different again if you are considered a ‘professional letter’, but this is unlikely to be the case for you.
However a reduction for length of ownership is taken into account; there is no tax after 22 years, and no social charges after 30.
So in your case you should only be eligible to pay the social charges, which will also be reduced.
If you have owned the property for 24 years, you should see a 46% reduction in these charges.
The latter is usually 17.2%, but may be reduced to 7.5% for those who have S1 forms, no French pension, and have their healthcare paid for by an EU/EEA state or the UK.
You might find, therefore, that the bill is less than you expect.
However, it is also worth discussing the issue with your tax office as, if the letting activity is only occasional and you retain use of the property the rest of the time, you may be able to argue for an exemption due to that.
Also, as only a part of the home is concerned, in theory the bill should only be proportional to the part used for letting activity, ie one quarter if you let out a quarter of your home.
As a general rule it is advisable to stop any letting activity at least one year before selling the property.
Waiting long enough to make an annual tax return which does not include any rental income would be ideal. This year’s new obligatory biens immobiliers declaration, if not showing letting activity at the property, is also likely to help.