How is CGT applied to properties, shares and movable goods belonging to foreign residents and non-residents in France? Find out here...
Residents of France are subject to fixed rates of capital gains tax of 19 percent on real estate properties and moveable goods. Shares are taxed at the scale rates of income tax. Social charges are applied on top, which are now 17.2% since 1 January 2018. There are also surtaxes on property gains.
Non-resident individuals owning property in France also pay capital gains tax at 19% plus surtaxes, regardless of where they live. They are also subject to the 17.2% social charges, but only on real estate capital gains.
Capital gains tax in French is called impôt sur les plus values.
Capital Gains on Real Estate
Surtaxes
Capital gains tax does not apply if you are selling your main residence. Besides the fixed rate of 19%, surtaxes have been applied to property gains as follows:
| AMOUNT OF GAIN | AMOUNT OF GAIN | TOTAL TAX RATE (19% PLUS SURTAX) | TOTAL RATE INCLUDING SOCIAL CHARGES |
| Up to €50,000 | 0% | 19% | 36.2% |
| €60,001 – €100,000 | 2% | 22% | 39.2% |
| €110,001 – €150,000 | 3% | 22% | 39.2% |
| €160,001 – €200,000 | 4% | 23% | 40.2% |
| €210,001 – €250,000 | 5% | 24% | 41.2% |
| Above €250,000 | 6% | 25% | 42.2% |
For each band, there are reliefs for the first €10,000 above the band.
Reductions and exemptions
The disposal of the main home is exempt from capital gains tax, provided it is used as an habitual and actual residence at the time of sale.
It is an ‘all-or-nothing’ relief and the gain can become wholly exempt even on a property that may previously not have been the main home for the whole period of ownership, provided it was the actual and habitual main home at the time of sale. Conversely, leaving a property without having sold it could mean losing the relief entirely when you do come to sell, even though it may have been the main home for many years beforehand. However there can be a 12-month breathing space if the property is put on the market when still the habitual home, though the owner then cannot remain in it.
This main home exemption is unlikely to be available to anyone who is not fully integrated into the French tax system and registered for tax purposes.
For other properties, once an individual has owned the property for six years, a taper relief system lowers the amount of tax and social charges you have to pay, until no tax is payable at all.
Where a property that is not the main home is sold the gain may be exempt from tax if:
- The individual did not own his main home during the four years preceding the disposal of the property, and
- The proceeds of the first sale are reinvested in the acquisition or construction of the individual’s main house.
There are also age-related exemptions. Individuals in receipt of a state pension and holders of an invalidity card are exempt from capital gains tax in France on the sale of real estate, provided they meet the following two conditions:
- They did not have a liability to wealth tax in the tax year preceding the year before sale (i.e. 2 years before the year of sale); and
- Their taxable income in the tax year preceding the year before sale (i.e. 2 years before the year of sale) was below a certain level.
Calculating the gain
The gain is the difference between sale and purchase price. You may then deduct 7.5% of the purchase price for acquisition costs (or more if documented), and actual improvement or enhancement expenses provided they have not already been taken into account of income tax purposes and are not routine maintenance expenses (redecorating etc). The improvements must have been carried out by registered contractors and proof of payment is required.
Where a property is sold more than 5 years after it was purchased, improvement costs can be valued as a flat 15% of the purchase price. The seller is not required to provide evidence of actual costs incurred, or even whether any improvements have actually been carried out.
Capital Gains on Shares
Gains on movable assets such as shares and other financial assets are taxed at the household’s marginal tax rate. Social charges of 17.2% apply to all gains. This brings the total tax rate up to 64.5% on movable assets.
There is a general taper relief of 50% for investments held for between two and eight years and 65% thereafter. So where a taxpayer holds shares for at least two years, 50% of the gain on disposal is free of tax, and if held for more than eight years, 65% of the gain is tax-exempt. These exemptions do not apply to social charges, which remain payable on the full gain at a flat rate of 17.2%.
There is also a more generous relief governing the sale of shares relating to small and medium companies (SME) created within the last 10 years, and which are based within the European economic area (EEA). This relief also applies to sales of EEA SME shares by business owners on retirement, as well as shares sold within a family. Those shares may benefit from extended taper relief as follows (this does not apply to social charges):
| HOLDING PERIOD | TAXABLE BASIS | SOCIAL CHARGE BASIS |
| Below 1 year | 100% | 100% |
| Between 1 and 4 years | 50% | 100% |
| Between 4 and 8 years | 35% | 100% |
| After 8 years | 15% | 100% |
Losses can be carried forward 10 years and offset against future gains on the sale of shares and securities (not other assets).
Other Moveable Goods
Capital gains tax is also payable on other moveable goods such as jewellery, antiques and works of art.
The following are exempt from capital gains tax:
- Furniture
- Household goods
- Cars
- Other moveable goods where the proceeds are less than or equal to €5,000
- Other moveable goods held for more than 12 years
The gain is reduced by actual acquisition costs and improvement expenditure. Furthermore the gain can be reduced by 5 percent for each complete year of ownership after the first two years and so reduces to nil after 22 years. The taxable gain is taxed at a fixed rate of 19%, plus social charges at 17.2%.
For chargeable items such as works of art, collectibles, antiques, jewellery, precious metals the taxpayer can opt for a special withholding regime. The withholding tax rates are 10% for precious metals or 6% for jewellery, works of art, antiques or collectibles. Social charges of 0.5% are added, so the total withholding tax is either 10.5% or 6.5% respectively.
Sale of Land Divided into Plots
Lotissem*nt is the French term used to describe the process of buying a piece of land with the specific intention of dividing it up into several plots before selling it at a profit. Any profits on the sale of the plots will be subject to income tax in the same way as profits from a trade. A non-resident carrying out such activities will be liable to 19 (or 33,1/3 if the sale is made by a company) percent withholding tax on any profits of this nature, subject to any double tax treaty provisions.
Where the land was not specifically acquired for this purpose, any gain on sale will not be taxed as profits from a trade, but as a capital gain under the normal rules for gains made by individuals. Development costs can be taken into account.
Payment of Capital Gains Tax
The tax due from the sale of real estate is declared on Form 2048 IMM.
The capital gains tax due is calculated by the notary and withheld at the time of sale. The notary then remits payment of the tax, together with Form 2048 IMM, within a month from the notarised deed of sale.Where the gain is exempt (e.g. sale of main home), or no tax is due (e.g. property has been held for more than 30 years), or when a loss has been made, there is no need to complete the Form.
Non-EU, Iceland or Norway residents are required by law to make a capital gains declaration supported by a tax representative accredited by the French Tax Authority. The SARF is one such representative which guarantees the accuracy of the calculation and the payment of the tax, and will deal with any litigation which may arise. The SARF usually charges 1% of the sale price, but you are not obliged to appoint them.
The non-resident can also appoint the purchaser, an accountant or Notaire as tax representative if they have been accredited by the French tax authorities. You do not need to appoint a tax representative if you are liable to tax on your French gain.
Exit Tax on Share Gains
An exit tax is levied on share gains made by individuals who leave France.
The tax applies to the portion of the gain accrued when the individual was resident in France, and it is charged at the scale rates, plus social charges of 17.2%.The measure affects individuals who are French resident for at least six years over the last 10 years, and either with direct or indirect shareholdings of more than 50% of the companies benefits (together with other members of the household), or where the shares are valued at over €800,000.
The tax charge arises the day before the individual leaves France, but there is provision for an automatic deferral of payment where the individual moves to an EU member state; or an EEA member state that has an administrative or mutual assistance agreement with France; or another country where there is a tax information exchange agreement in place and the individual has moved for professional reasons.
However, tax and social charges on the unrealised capital gain may be cancelled (or the tax, - but not social charges - reimbursed if it was already paid):
- After a period of eight years following the taxpayer's departure from France, or
- If the taxpayer moves back to France and still holds the shares, or
- Upon the taxpayer's death provided the shares are still in the deceased’s estate, or
- Or if the shares are given
An interesting way to mitigate the exit tax is to invest in the same portfolio via an assurance-vie. This allows French resident to avoid this exit tax when they change residency.
Further Information
- The French tax authorities (Direction Générale des Impôts) have an onlineservicein English that helps calculate French tax obligations
Tax rates, scopeand reliefs may change. Any statementsconcerning taxation are based upon our understanding of current taxation lawsand practices which are subject to change.Tax information has been summarised; an individual is advised to seekpersonalised advice. Blevins Franks are the leading international tax and wealth management advisers to UK nationals living in Europe. Visit www.blevinsfranks.com.
- Capital Gains Tax
- French Tax Changes
- Gifts Tax
- Property Taxes
- Succession Tax
- Wealth Tax
- Value Added Tax
- Tax Payment Deadlines
Introduction
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Capital Gains Tax in France
Residents of France are subject to a fixed rate of capital gains tax of 19% on real estate properties and movable goods. Shares, on the other hand, are taxed at the scale rates of income tax. In addition to the capital gains tax, social charges are applied at a rate of 17.2% since January 1, 2018.
Non-resident individuals owning property in France also pay capital gains tax at a rate of 19% plus surtaxes, regardless of where they live. They are also subject to the 17.2% social charges, but only on real estate capital gains.
Capital Gains on Real Estate
Capital gains tax on real estate properties in France is called "impôt sur les plus-values." There are surtaxes applied to property gains based on the amount of gain. The total tax rate, including the surtaxes and social charges, varies depending on the amount of gain. Here is a breakdown of the tax rates:
- Up to €50,000 gain: 0% surtax, 19% total tax rate, 36.2% total rate including social charges.
- €60,001 – €100,000 gain: 2% surtax, 22% total tax rate, 39.2% total rate including social charges.
- €110,001 – €150,000 gain: 3% surtax, 22% total tax rate, 39.2% total rate including social charges.
- €160,001 – €200,000 gain: 4% surtax, 23% total tax rate, 40.2% total rate including social charges.
- €210,001 – €250,000 gain: 5% surtax, 24% total tax rate, 41.2% total rate including social charges.
- Above €250,000 gain: 6% surtax, 25% total tax rate, 42.2% total rate including social charges.
For each band, there are reliefs for the first €10,000 above the band.
Main Residence Exemption
The disposal of the main home is exempt from capital gains tax in France, provided it is used as a habitual and actual residence at the time of sale. This exemption is an "all-or-nothing" relief, meaning the gain can become wholly exempt even if the property was not the main home for the whole period of ownership, as long as it was the actual and habitual main home at the time of sale. However, leaving a property without having sold it could result in losing the relief entirely when you do come to sell, even if it was the main home for many years beforehand. There is a 12-month breathing space if the property is put on the market when it is still the habitual home, but the owner cannot remain in it during that time. This main home exemption may not be available to individuals who are not fully integrated into the French tax system and registered for tax purposes.
Other Properties and Taper Relief
For other properties that are not the main home, a taper relief system applies after an individual has owned the property for six years. This system gradually lowers the amount of tax and social charges that need to be paid, until no tax is payable at all. The taper relief percentages are as follows:
- Between two and eight years of ownership: 50% relief.
- After eight years of ownership: 65% relief.
It's important to note that these exemptions do not apply to social charges, which remain payable on the full gain at a flat rate of 17.2%.
Capital Gains on Shares
Gains on movable assets, such as shares and other financial assets, are taxed at the household's marginal tax rate in France. Social charges of 17.2% also apply to all gains, bringing the total tax rate up to 64.5% on movable assets. There is a general taper relief of 50% for investments held for between two and eight years, and 65% thereafter. This means that if a taxpayer holds shares for at least two years, 50% of the gain on disposal is free of tax. If the shares are held for more than eight years, 65% of the gain is tax-exempt. However, these exemptions do not apply to social charges, which remain payable on the full gain at a flat rate of 17.2% .
Other Moveable Goods
Capital gains tax is also payable on other moveable goods, such as jewelry, antiques, and works of art, in France. However, certain items are exempt from capital gains tax, including furniture, household goods, cars, other moveable goods where the proceeds are less than or equal to €5,000, and other moveable goods held for more than 12 years. The taxable gain is taxed at a fixed rate of 19%, plus social charges at 17.2%. The gain can be reduced by actual acquisition costs, improvement expenditure, and 5% for each complete year of ownership after the first two years. The taxable gain can also be reduced to nil after 22 years of ownership. For chargeable items like works of art, collectibles, antiques, jewelry, and precious metals, taxpayers can opt for a special withholding regime with different withholding tax rates.
Payment of Capital Gains Tax
The tax due from the sale of real estate in France is declared on Form 2048 IMM. The capital gains tax due is calculated by the notary and withheld at the time of sale. The notary then remits the payment of the tax, together with Form 2048 IMM, within a month from the notarized deed of sale. In cases where the gain is exempt or no tax is due, there is no need to complete the form. Non-EU, Iceland, or Norway residents are required by law to make a capital gains declaration supported by a tax representative accredited by the French Tax Authority. The tax representative can be appointed by the non-resident or can be the purchaser, an accountant, or a notary accredited by the French tax authorities. The tax representative ensures the accuracy of the calculation and the payment of the tax.
Exit Tax on Share Gains
An exit tax is levied on share gains made by individuals who leave France. The tax applies to the portion of the gain accrued when the individual was a resident in France and is charged at the scale rates, plus social charges of 17.2%. The tax charge arises the day before the individual leaves France, but there are provisions for automatic deferral of payment in certain circ*mstances. The exit tax may be canceled or reimbursed if certain conditions are met, such as after a period of eight years following the taxpayer's departure from France, if the taxpayer moves back to France and still holds the shares, or upon the taxpayer's death if the shares are still in the deceased's estate.
Conclusion
In France, capital gains tax is applied to properties, shares, and movable goods belonging to both residents and non-residents. The rates and exemptions vary depending on the type of asset and the individual's circ*mstances. It is important to consult with a tax professional or seek personalized advice to understand the specific implications and obligations related to capital gains tax in France.
