Capital Gains Tax

There are some changes afoot in the tax and social security system for people living in France, things like health charges for early retired new residents and wealth tax. I will write up some notes and references to good sources.

One recurring question is about Capital Gains Tax on selling a second home – as far as I am aware there are no recent (this year) changes and it simply depends on how long you have owned the property, where your main residence is and if you have had allowable works done by an approved registered French builder.

The Notaire dealing with the sale is responsible for decisions on what is due and collecting the tax when you sell.

Her are a couple of recent emails I have had.

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Hi!
We are a US couple who has owned a home in the Ardeche for 6 years. We are interested in selling it and wanted to find out what type of capital gains taxes, and other fees would be involved in this transaction. Is it true that there is a 10% discount off capital gains for every year after 5 yrs that you own the house? Do you have any idea where we can get more information on fees involved and other important information on selling a house in France as an American. Do we need to claim any of this income in the US?

Thanks in advance for your help! We greatly appreciate it.

All the best,
Susie

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Hello Susie,

As a US resident you will pay 33 percent capital gains tax on the difference of the purchase price (including agents and legal fees) and the selling price.

This reduces by 10 percent a year after five full years of ownership, so after the 15th year of ownership (usually in the 16th year) there is no tax due.

The tax is collected by the Notaire handling the sale.

There are no other costs you have in selling, the taxes and Notary fees are paid by the purchaser and the realtors will add their commission to your selling price.

If you have had significant alterations done by a French registered builder (extensions or other added work) the cost of the valid French invoice can be used to reduce tax – but repairs (even major repairs), decoration or work you do yourself cannot be offset.

After French taxes, any profit you make on the sale will need to be declared to the IRS in the USA. I advise professional advice regarding your position in the USA.

Hope this helps – do let me know how you get on

Best wishes

Tony

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NB

The tax due for a European Community resident is 16 percent

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Tony
My wife and I have a ski apartment in Chamonix worth £200,000, which we bought in 1991 for £76,000.  We would like to give it to our four children. We have seen a French Notaire who says we can use “Usufruct” to do this without paying any French tax.  Charges would be £4,000,and it would be no business of the British tax authorities.  Our accountant says otherwise.  She says we would be clobbered for about £40,000 CGT,less indexation and personal allowances.  Can you advise us where to go from here?
David

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Hello David,

The French Notaire is correct as you will have no CGT to pay.

Capital Gains Tax  (TVA in France) on a maison secondaire for a  European resident is 16 percent. However this reduces by 10 percent per annum after the fifth year so after 15 full years there is no CGT to pay on your property as you bought in in 1991. The maximum CGT you would have been under 20000 pounds anyway – your accountant is well out of order.

To use a Usefruct and to transfer this to your children while you have the full use and benefit may be a good idea as this will reduce your capital for wealth tax considerations.

Do let me know how you get on

Sincerely

Tony