Know the rules on capital gains tax

IMAGINE you have decided to sell your property in France, have found a buyer and met with your notaire for the formalities - unfortunately, they say you are liable to pay capital gains tax and therefore will not recover the full sale price.

The issue of whether or not you will pay CGT (impôt sur les plus-values in French) is an important one when considering whether or not to sell your home in France, says François Trémosa, a notaire with the Groupe Monassier in Toulouse.

Each case is different and there are a wide variety of situations. Fortunately many people, especially if they are resident in France, are exempt from the tax. Exemptions for private individuals selling houses (they are much the same for those owned through French Société Civile Immobilière - SCI) include:

- For a resident, the sale of their main home
- The sale of property worth less than e15,000 (a piece of unbuilt land, a car parking space etc.)
- Compulsory purchase
- Properties that have been owned for more than 15 years
- Sellers who benefit from an old age or disability pension (under certain conditions)

In the case of people who are not residents in France, but are EU citizens (or of another country able to invoke a non-discrimination clause, including the USA) there is an exemption for the first two sales since 2006 as long as:

- You have, in the past, been resident in France for tax purposes for at least two consecutive years
- You had the use of the property on January 1 of the year prior to the sale (ie. it was not rented out).

To be exempt in future property sales, they must not happen within five years of the sale of the first property.

The capital gain is the difference between the net sale price and the net purchase price of the property. To get the net sale price you deduct the following from the amount you received for it:

- The estate agent’s fees
- The cost of the surveys conducted by the seller (for instance, checks for of asbestos, termites etc)
- VAT when this is due by the seller

To get the net purchase price you add the following to the amount you paid for it:

- Either a fixed 7.5 % of the purchase price or the actual amount of the additional cost paid when the property was bought (stamp duty, agent’s fees, notaire’s fees etc.)
- The cost of any work on the property, either for its actual amount or a fixed sum of 15% of the purchase price if the developed property is held for more than five years.

The rate of the tax, applied to the gain, is:

- 16% for residents of the EU, Norway and Iceland (if you are French-resident, you will have to add 12.1% of social charges, which will bring the total cost to 28.1 %)
- 33.3% for residents outside the EU, Norway and Iceland

However there is an allowance of 10% per full year of ownership beyond the fifth, therefore (there a total exemption after15 years) plus there is a fixed allowance of e1,000 (e2,000 for a married couples) per sale, per seller.

As tax law is subject to frequent changes, it is advisable to consult a notaire to know where you stand before selling your home. To find an English-speaking notaire near you see www.notaires.fr