Capital gains tax in France

News & Guides / Capital gains tax in France

The calculation of capital gains tax (plus value) in France can be quite complicated and will depend on several different factors such as the length of time you have owned the property, whether you are resident or non-resident, or resident of the EEA, the size of the capital gain and some other factors. There are also a number of ways you can be exempt from paying capital gains tax which will be explored. In this article we will focus on the most simple and common situations for both residents, non-residents, and residents of the EEA and how it is applied.

The first important point to note is that there are actually two taxes that make up the tax payment due on the profits from the sale of a property in France. For both residents and non-residents this consists of the capital gains tax at 19% and also the social charges at 17.2% which combine to form a tax of 36.2%. If, however, you are a resident of an EEA country and not resident in France then you can avoid the 17.2% social charge so long as you can provide an S1 form proving you pay social charges already in your home country. If you can do so then you will no be liable for the 17.2% social charge but instead for a solidarity tax of 7.5%. These taxes are collected by the notaire at the time of sale.

The capital gains tax element is reduced from year 6 to 22 so that after a period of ownership of 22 years there will in fact be no capital gains tax to pay. It is reduced by 6% each year from years 6 to 21 and then the last year 22 is reduced by 4%. The social charges are also reduced but from years 6 to 30 where years 6 to 21 are reduced at 1.65% per year, year 22 at 1.6% and years 23 to 30 at 9% per year so that by year 30 there is no longer any social charges due. For EEA residents there is no reduction on the solidarity tax of 7.5% so this will always be due.

In addition to this there is a supplementary tax depending on the amount of capital gains that has been generated and is calculated per owner as follows:

Non-residents from outside the EEA are sometimes also requested to appoint a tax agent to help calculate the amount of tax due. If you are a resident and it is your main home, then you are exempt from paying capital gains tax. Below is worked example for a non-resident who is not part of the EEA:

Purchase price: 500,000 Euros

Sales price: 900,000 Euros

Years held: 15 years

Gross capital gains tax due before allowance: 19%*400,000 Euros = 76,000 Euros

Capital gains tax reduction: 10*6% = 60%

NET capital gains tax due = 30,400 Euros

Gross social charge before allowance: 17.2%*400,000 Euros = 68,800 Euros

Social charges reduction: 10*1.65% = 16.5%

NET social charge due: 57,448 Euros

TOTAL capital gains tax + social charges: 87,848 Euros

As there is a double tax treaty between France and most countries around the world you will only pay the difference between the rate due in France and the rate due in your home country and then only if the rate in your home country is higher than what you paid in France.