Extra step in French property sales for UK, US, Australian residents

Non-EU citizens must use a fiscal representative to deal with capital gains tax. We asked one such intermediary what is involved

Fiscal rep, Aude Debieuvre, has seen capital losses in ski resorts, especially with Britons who bought new chalets at high prices in the early 2000s
Published Last updated

UK residents now make up the majority of clients for the Société accréditée de représentation fiscale (Sarf), which says it is France’s largest and oldest firm of fiscal reps.

The queue of Britons to the firm’s door is due to Brexit: non-residents from outside the EU/EEA, including Americans and Australians, must designate one of these intermediaries to deal with property capital gains tax.

British now largest client group

Sarf's managing director Aude Debieuvre, who deals especially with the Riviera and Savoie/Haute-Savoie, said they come ahead of other key nationalities such as Swiss people and Americans.

Reduced social charges for UK residents

However, UK residents have one advantage: they can still pay reduced social charges, at 7.5% instead of the 17.2% usually reserved for EEA residents.

The change was confirmed by the French tax officials retrospectively earlier this year, when they judged that the two Brexit deals’ rules on social security coordination justified UK residents continuing to benefit.

“That was completely unexpected,” Ms Debieuvre said.

To benefit, sellers have to obtain written confirmation from HMRC that they are affiliated to the UK social security system via national insurance contributions.

Sarf can help people with reclaims if they paid too much in charges last year, at a percentage of the sum recovered.

Fiscal reps study law and tax

Ms Debieuvre said fiscal reps have accreditation from the central tax authorities, the DGFiP, which requires “sufficient guarantees of morality and of finances”.

The reps, of whom Sarf has around 15, must have studied law and tax.

Sarf has offices in Nice, Paris and Saint-Rémy. It is a private company, founded in 1983, and has always focused exclusively on this job – dealing with foreign residents’ capital gains.

Some reps take on other kinds of work, Ms Debieuvre said.

Sales of over €150,000 need a fiscal rep

Over the years they have dealt with sales as high as €250million (in Paris for a Middle Eastern seller) but they are usually under a million.

She said one recent trend has been a lot of capital losses in Alpine ski resorts, especially with Britons who bought new chalets at high prices in the early 2000s which have not kept their value.

Sarf deals with losses and gains, as the criterion for involvement is a sale for a value of €150,000 or more, not the size of the gain or loss.

As with gains, Sarf is paid a percentage of the sale price, usually 0.5%.

This amount can be integrated into the capital gains calculation, thus slightly reducing the taxable gain and resulting tax.

What does a fiscal rep do?

Ms Debieuvre said: “The reason for needing a fiscal rep is based on the French tax system, whereby the seller is taxed based on their declaration, then the tax authorities have three years in which they can run checks.

“If it is a non-resident outside the EU, the tax authorities would have great difficulty in pursuing legal action abroad if something comes up.

“The seller must therefore designate an accredited fiscal rep who will act as a guarantor, will make sure the correct tax is paid and will respond to any questions from the tax office.

“The rep’s role involves collecting all relevant documents, then calculating the tax as accurately as possible, drawing up a devis [quote] to send to the client and their notaire, then once it is agreed, making a tax declaration so that the sale can proceed smoothly.

“The tax is paid by the notaire out of the sale price.”

Keep all home improvement bills

There are two issues which sometimes cause difficulties: factures de travaux (bills for work done) and bank statements.

Ms Debieuvre said the latter, proving payment of bills, is a legal requirement, although she acknowledged this can be difficult where old statements were not kept.

“It is important that readers realise the necessity of keeping everything, if they are having work done,” she said.

As for bills, only those related to actual construction, extension or adding new amenities are legally deductible. A new lift or air conditioning is acceptable, for example, but not just ‘renovation’ or redoing the plumbing or electricity. They must also list details of the nature of the work, which people should double-check.

Bank statements prove deductible bill payments

Some bills being ineligible, for example due to a lack of corresponding bank statement, can be a problem, though this may be mitigated somewhat by capital gain reductions related to length of ownership and the reduced social charges for UK residents.

If a client wants to deduct bills without sufficient proof, a rep can hold back a sum in guarantee, equivalent to the difference between the tax with and without the deduction, plus possible tax office penalties, of an extra 75%.

The money is returned after three years, assuming it has not been claimed.

“We generally do not advise this option due to the high penalties for non-residents in the case of tax office checks [and where officials are not satisfied by the deductions],” Ms Debieuvre said.

Another option is to pay all the tax without the problematic deductions, then for Sarf to request a dégrèvement (reduction). This avoids potential penalties.

Related articles

How can I sell French property owned by a UK firm?

If we sell items from our French second home on eBay will we be taxed?

When are property sales in France free from capital gains tax?