Update on Capital Gains Tax in France

capital gains tax in France

As legislation on capital gains tax in France tends to evolve, we’re providing an update here. 

It’s a topic that can be a minefield. So, here’s our guide for those selling – or buying – property in the French capital.

What exactly is capital gains tax in France?

French residents are liable to pay two sets of tax: capital gains tax and social charges. 

Impôt sur les plus values (capital gains tax) comes into play when selling real estate. The standard rate for capital gains tax is 19%. On top of this, surcharges are payable on any gains over €50,000. These range from an additional 2% up to a maximum of 6% for gains over €260,000. 

 Finally, contributions sociales (social charges) are due on top of capital gains tax. Currently, this is 17.2% for combined investment income and gains. These charges fund state healthcare among other things. 

Non-residents and capital gains tax in France

Under certain conditions, non-resident taxpayers are exempt from capital gains tax. These rules apply mostly to Europeans.

 To satisfy these conditions, you must have been fiscally domiciled in France for at least two consecutive years at any time prior to the sale, and be a national citizen of a European member state (plus Iceland and Norway). This exemption applies to taxable net gain up to €150,000.

Being a non-resident can also affect the social charges. From 1 January 2019, it’s now possible to benefit from a lower social charge rate of 7.5% – a potential tax saving of 9.7%. 

 But to benefit, you must have coverage with a healthcare system of another EU or EEA country. 

With many options on the table, it really is worth finding out which exemptions, if any, may apply to you. 

Exemptions for Americans and other foreign buyers

Paris has long attracted property buyers from outside of Europe. These sellers can expect to pay from 26.5% to 36.2%.

Although those selling in France may not have the same exemptions as French or other European buyers, there are still ways to reduce the tax. Or indeed, remove the need to pay anything at all. 

You do not need to pay capital gains tax when selling your primary residence. Other exemptions are possible for sellers investing the proceeds into a primary residence, who have not owned one for the previous four years. 

Another exemption is the ‘tapered relief’ system. For capital gains, this begins in your 6th year of owning the property, and reduces the tax on a sliding scale up to your 21st year of ownership. After 22 years, no capital gains tax is due. 

Social charges, however, provide only a reduction after 22 years. Exemption does not take effect until after 30 years of ownership.

Good notarial advice is important from day one. How you structure your purchase can affect capital gains down the road. And certain expenses are deductible from capital gains, so it is important to know which receipts to hold onto.

On a side note, Americans living in France may be able to enjoy further savings on other taxes. This is due to the recent income tax victory as reported in this blog a few months ago.

Get in touch with 56Paris

We understand that this legislation can be a technical subject. 

So for the latest updates on capital gains tax in France, or all other aspects of the Paris real estate market, don’t hesitate to get in touch with 56Paris today. 

This guide is for informational purposes only. Expert advice should be sought for your individual tax situation. 

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