Changes In French Capital Gains Tax - Selling Your Property Could Cost More Than You Think
The French government has now completed its reform of French capital gains tax on sales of property. An increase in the rates and extension in the period of tapered relief will do nothing to improve the moribund state of the French property market.
The Original Draconian Proposal
Like other European governments, the French state is strapped for cash. An overall review of tax breaks in the course of the summer homed in on the regime applicable to sales of second homes. This favoured a lengthy period of ownership, with the capital gain being reduced by ten per cent for each year beyond five years of ownership. Sales were thus free of capital gains if they took place fifteen years or more after acquisition.
A Compromise Solution
First, the percentages: the capital gain is now reduced by 2% for each year after the fifth year following acquisition, by a further 4% for each year after the seventeenth year, and by a further 8% after the twenty-fourth year. This means that thirty years of ownership results in exemption from capital gains tax.
Secondly, the rates: 19% by way of tax and 13.5% by way of social charges, giving an overall rate of 32.5%.
The Impact On Non-Residents
French capital gains has always applied to the sales of French property by non-residents. If the vendor is resident in a European Union member state, the rate is 19%. If not, it will be at the rate of one third of the gain. Social charges will not apply.
Although the changes in the French system will result in more French capital gains tax becoming payable, this will not necessarily increase the taxpayer’s total bill. UK-resident taxpayers, for example, will be required to pay UK capital gains tax, with a right of deduction of the amount paid to the French. Although the impact will vary from person to person, the overall amount may be the same after the reform as before.
And The Good News?
Well, everything’s relative, but there are two rays of sunshine in the gloom. First, there was originally a proposal to extend capital gains tax to the principal residence. This has been abolished. Secondly, the new system will not apply to sales where completion takes place before 1st February 2012.
Impact On The French Property Market
The buoyant property market in Paris and other major French conurbations is at stark odds with the Dordogne and other regions of France – particularly those where the English bought in force in the good years. Antony Mair of http://riberacproperty.com/ concludes “In our view, it is unlikely that English buyers will be much influenced by the capital gains tax changes seen in isolation. The position may well be different for persons from other jurisdictions, such as the Netherlands or the United States. As part of a wider picture, however, in which we see increasing aggression of the French tax authorities in their fiscal policies, coupled with uncertainty over the economies of the eurozone countries and the future of the euro itself, this reform will not help a market that is showing little sign of life.”
- Contact Information
- Antony MAIR
- MCM Dordogne Property SARL
- Contact via E-mail
This news content may be integrated into any legitimate news gathering and publishing effort. Linking is permitted.
News Release Distribution and Press Release Distribution Services Provided by WebWire.