Two categories of taxes are payable in France. This are called the social charges and capital gains tax. Real estate sales have a normal capital gains tax rate of 19%. Starting at 2% and working up to 6% for gains above €260,000, progressive surcharges are levied for gains exceeding €50,000.
This results in a possible maximum tax rate (with full social charges) of 42.2% – however there are several reliefs and exclusions so you should not have to pay this much tax.
For investment income—including property gains—the normal social charge rate is 17.2%. If you use another EU/EEA country’s health care system, you might gain from a new reduced 7.5% rate. This relates to non-residents having profits or income coming from France as well as residents holding Form S1.
The Exemption for First-home Buyers
Should you own one property and it be your family house, you most likely won’t have to pay any taxes on the gain. Take care, nevertheless, to follow the guidelines precisely.
Since it is your actual and regular dwelling at the time of sale, the primary house is free from social charges and capital gains tax. You would be registering for and paying taxes in France. It also covers a house owned in a SCI (French property holding company).
Whether or not you sold after you moved out will determine whether you lose this benefit. Previous length of residence will not matter. However, if you place your house on the market and it stays unoccupied one year after you leave, the exemption can be granted. If you can show you are trying your best to sell it, you might be able to stretch this term.
Though from 2019 the primary home exemption will apply until the end of the year you leave France, this one-year extension will not apply should the owner depart France and become tax resident abroad.
Other tax exemptions from capital gains
If an older resident receives a state pension (or invalidity card) and their taxable income that year was below a specified level (the 2016 income level for 2018 gains was €10,815 for the first part of a household, €2,888 for additional half parts), they may escape tax and social charges.
If you sold a house and re-invest the money into one but did not possess a main house the previous four years, you might also be free from taxes.
provided the transaction is completed within five years of leaving France and they had been tax resident for at least two, French citizens living abroad and residents of EU nations, Norway and Iceland (or another state provided the tax treaty permits it), may not be liable for capital gains tax. This is just accessible once and only for gains up to €150,000; it is not limited to the principal house. It has no bearing on property kept in a SCI.
CGT relief
You should know that your tax payable reduces with increasing property ownership length.
Should you not gain from these exemptions, a taper relief method will lower your tax and social costs.
From the sixth year forward, capital gains tax is dropped by six percent annually (four percent in year 22). After 22 years, there is therefore no tax due. Escaping social charges is more difficult. From year six they are down 1.65% annually (1.6% for year 22), then from year 23 the drop rises to 9%. After thirty years, this qualifies you as totally exempt.
Determining the Price increase
The difference between purchase prices and selling prices is the taxable gain—that is, the probate value if inherited. You can write off 7.5% acquisition costs; real improvement expenses (with limitations) and qualifying loan interest not eased against income. Get guidance especially if you are selling a rented property as loan interest deduction might be tricky.
Making capital gains tax payments in France
Selling real estate in France calls for the employment of a notary. They will figure the tax due, withhold it at sale, then pay the tax for you. Non-EU, Iceland, or Norway resident sellers of property must utilise a tax agent registered with the French Tax Authority to declare capital gains tax.
Property in the United Kingdom
Remember too that your UK house might be considered as a second property and so taxed if your primary residence is in France. While you will get a credit in France for tax paid in the UK, French residents selling UK property are liable to tax in both countries.
French taxes on wealth
Another property tax to take into account is wealth tax, which was eliminated for investments (shares, bonds, assurance vie etc.) from January 2018 but still applies yearly to the worldwide property of French citizens. Should your entire property value exceed €1,300,000, you are accountable.
Examining your possible tax obligations in both countries will help you determine when selling and buying real estate is most tax-effective when you are switching countries. Timing a relocation or a sale might pay well.
As always with tax issues, especially involving two nations, things might be more complex than first seem.
