Plan for capital gain tax to apply to some main French homes

Exemptions to capital gains tax on the sale of main homes in France could be limited to properties held for at least five years, after MPs voted on an amendment to the 2026 budget. 

The aim of the change is to limit speculation on properties and sellers using loopholes to avoid capital gains tax on non-primary residences.

Changes to the draft 2026 budget are being made as MPs and senators debate the bill, with Prime Minister Sébastien Lecornu hoping that by opening it up to amendments, the final version will be backed by the majority of members.

Voting on amendments can take place during initial scrutiny of the text in small committees of MPs or senators as well as when the bill is examined by the full Assemblée nationale and Senate. 

The capital gains tax idea has significant support, but is not certain to be retained in the final law.

What is proposed?

Some Socialist MPs argue that current rules have led to the capital gains tax (CGT) system being exploited.

Currently, there is capital gains tax (CGT) on the sale of second homes and investment properties unless they have been owned for 30 years. 

Owners are gradually exempt from the main (income tax) element after 22 years and from the social charges after 30. A sliding 2% to 6% tax on profits of over €50,000 is also included if the property has not been owned for at least 22 years.

However, sales of main homes are fully exempt from tax and social charges, which is claimed to have allowed some owners to benefit from exemptions that could be deemed contrary to the aim of the legislation.

The rule about the income tax element is listed in article 150 U of the French tax code, and another rule in the social security code provides that where this applies, the gain is also exempt from social charges.

Why the ‘main home’ is under scrutiny

The ‘main home’ is meant to be the property where you have your “habitual and effective” residence for “most of the year” and where you have the strongest links, for example related to family and work.

However, in practice, it is often taken as being the last place registered as such by the owners with their tax office.

It is alleged that in some cases homes are temporarily designated as such by owners as a tax dodge to avoid paying charges that they would have incurred if the property remained listed as a second home. 

In some cases, it is said, speculators may buy and then quickly sell homes within the space of a few months – with the property listed as a ‘main home’ even if they do not move in. 

Capital gains tax could also be avoided when selling a rental property by declaring it a principal residence and ‘moving in’ just prior to a sale.

The practices are particularly common in tourist areas such as the south-west, argue the MPs, contributing to high housing costs and a property shortage.

What the changes could mean

The proposed changes would limit the exemption listed in article 150 U from coming into force until the home had been owned – and used as a main residence – for at least five years before being sold.

This would prevent speculators from flipping properties while also limiting the impact on genuine homeowners looking to sell. 

The Socialist amendment says this would apply apart from cases where the sale is due to an urgent family, health or professional reason or in order to purchase another main home. 

Thus, sales could be exempt in situations such as a professional transfer, long-term hospitalisation, admission to a nursing home, or death or separation, according to the MPs who put the amendment forward.

It is unclear how much revenue this would raise for the government, however the main aim is to minimise property sales being exempt from capital gains tax if they are not a person’s principal residence.

Deadline for approval

A first version of the amendment was adopted this week by the MPs’ finance committee as part of scrutiny of the first, ‘income’ (taxation), part of the finance bill. 

However, they went on to reject the whole ‘income’ text on Wednesday night after failing to come to an agreement on a compromise version to submit to the full house.

The text as originally drafted by the government is thus starting scrutiny by the full house today and the amendment is listed again for consideration. 

To remain in the final budget law it will need to be voted through by the full Assemblée nationale and Senate before the end of the year.