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Capital Gains Tax On Property Sales – 2013 Rates and Rules

blevins

Capital Gains Tax On Property Sales – 2013 Rates and Rules

 

In a surprise move in December, the French government increased the rate of tax paid on capital gains made on property.   How much extra you will pay, if any at all, depends on how much gain you make. The change applies to both residents and non-residents.

 

Earlier last year, the government also changed the rules for non-residents who sell or rent property in France, so that they are now liable for social charges on top of capital gains and income tax. Prior to that, only residents paid social charges.

 

The good news is that the main home is still exempt from tax, and there are allowances for length of ownership so that the longer you have owned the property, the lower your tax rate will be. There is also an extra deduction available for 2013.

 

So, how much tax will you pay if you sell a property in France?

 

Any gain you make on French property is liable to both capital gains tax and social charges. For unearned income (so for investment and savings income, capital gains etc) the rate is now 15.5%.

 

Until the end of 2012 capital gains were taxed at a fixed rate, regardless of the amount of the gain. Last year the rate was 19%.

 

With effect from 1st January 2013 (unless a promesse or compromis de vente was signed before 7th December 2012), a surtax is added to the 19% fixed rate as shown below. This is expected to earn the government around €130 million this year).

 

Amount of gain

Surtax Rate

Total tax rate  

(19% + surtax)

Total rate including                15.5% social charges

Up to €50,000

0%

19%

34.5%

Between €50,000 and €100,000

2%

21%

36.5%

Between €100,000 and €150,000

3%

22%

37.5%

Between €150,000 and €200,000

4%

23%

38.5%

Between €200,000 and €250,000

5%

24%

39.5%

Above €250,000

6%

25%

40.5%

 

Gains on development land will be taxed at scale rates from 2015. The 19% withholding tax deducted at source will be treated as a payment on account of the final tax due.

 

Allowance for length of ownership

 

There is an allowance, available to both residents and non-residents, which will reduce the amount of tax that you have to pay if you have owned your French property for a number of years.

 

Prior to 31st January 2012 there was a 10% reduction in the taxable gain for each complete year of ownership after five years. This meant no tax was payable after 15 years. Unfortunately the rules then changed, so that you now have to wait twice as long to avoid tax completely.

 

A sliding scale of relief (from both tax and social charges) now applies for each complete year of ownership after the first five years, with full exemption from tax and social charges applying after 30 years.

 

If you own your property for less than six years, the gain will be taxed at normal rates listed above. For properties held for more than six years, the sliding scale is as follows:

 

  • 2% relief for each year of ownership between 6 and 17 years (i.e. 12 years at 2%)
  • 4% relief for each year of ownership between 18 and 24 years (i.e. 7 years at 4%)
  • 8% for each year of ownership over 25 years (i.e. 6 years at 8%)

 

If you sell a property in 2013, you will receive a special extra 20% deduction against the net taxable gain. However note that this only applies to the capital gains tax; it does not apply to social charges.

 

This 20% deduction is only scheduled to apply for 2013.

 

The main home

 

If the property you sell has been your main home, it is completely free from both capital gains tax and social charges.   This applies if the property is your habitual and actual residence at the time of the sale. The number of years you have lived in the property is irrelevant.

 

This exemption cannot apply to properties owned by non-residents (it cannot be your main home if you do not live in France). It is also unlikely to be available if you have lived in France without being fully integrated into the French tax system and registered for tax purposes.

 

For advice on all the various tax changes in France, and on effective tax mitigation strategies, contact your local Blevins Franks Partner, Mary Taylor, on 05 62 30 51 40 or This email address is being protected from spambots. You need JavaScript enabled to view it.

 

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice.

 

 

 

 

 

 

mary

 

Mrs Mary Taylor B.Ed hons Cert PFS

Partner

 

Blevins Franks Financial Management

 

Web site www.blevinsfranks.com

 

Email

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Or phone··· 05 62 30 51 40

 

Blevins Franks Financial Management Limited is authorised by the UK Financial Services Authority for the conduct of investment and pension business.·

For currency exchange and information Mary has researched and recommends

 

http://www.moneycorp.com/