If your main home/principal residence is in France and you are a tax resident in France it is a legal obligation that you declare all your world/global income and annual capital gains to the French tax authorities. It’s irrelevant if gains are made outside of France. For example if you have moved to France from say the UK, and you sell your UK property at a later date, any capital gains (if any are made) must be declared in France. Since 05 April 2015 the UK rules have changed and the primary taxing right now vests with the UK and you will pay tax in both countries
Even if your UK home was your family home when you resided in the UK, when you moved to France your property in France is classified as your family home. If you have retained your UK property then this becomes a secondary residence and subject to CGT if you sell it.
Capital Gains tax on properties are applied as two separate taxes. The rates for 2019 are as follows:
Capital Gains Tax in France
The basic rate of capital gains tax is 19%.
Tapered relief against the tax is granted over 22 years of ownership, commencing from the 6th year of ownership, as follows:
- No allowance for the first 5 years of ownership.
- Between 6 and 21 years of ownership: 6% allowance per year.
- For the final 22nd year of ownership: 4% allowance.
This means that a property owned for 10 years would be granted a 30% discount on the tax, and one held for 15 years would be granted a 60% discount.
Social Charges (Prélèvements Sociaux)
Since 2018 the standard rate of social charges is 17.2%, applied in addition to the main CGT tax itself.
In the same manner as capital gains tax, tapered relief is granted, but over a longer period of 30 years, commencing from the 6th year of ownership, as follows:
- No allowance for the first 5 years of ownership.
- Between 6 and 21 years of ownership: 1.65% per year.
- For the 22nd year of ownership: 1.60% in this single year.
- Between the 23rd year to 30th year of ownership: 9% per year.
The effect is that on a property owned for 10 year a discount of 8.25% on the social charges is granted. At 15 years, the discount would be 16.5%.
Note that: as a result of a change of law in 2019, social charges on people resident in France holding an S1 certificate of health exemption (or similar) were abolished and replaced by a ‘solidarity tax’ (prélèvement de solidarité) at the rate of 7.5%. That gives a combined total rate before allowances of 26.5% for the two taxes.
This change also applies to non-residents living in the EEA who sell their French property, e.g. second homeowners.
You are granted an allowance based on the duration of your ownership of the property, as well as allowances for eligible costs. The allowances for the duration of your ownership is below:
|Ownership Period||Capital Gains Tax Allowance||Social Charges Allowance|
Former French Residents
Since January 2019, former residents of France have been put in much the same position as residents, with the right to obtain exemption from capital gains tax on the sale of their former principal home.
Under the new rule, a non-resident who sells a property that was their main residence can obtain complete exemption from capital gains tax on the double condition:
- that this transfer be made no later than 31 December of the year following in which the seller moves their tax domicile outside France;
- and that the property has not been made available to third parties, free of charge or against payment, between the relocation and the sale.
The exemption applies irrespective of nationality or country of residence.
In the case of former residents of the UK resident in France a tax treaty signed between France and UK, operative from 1st January 2010, makes you liable for capital gains in France on the future sale of your former home. However the UK changed it tax laws regarding CGT and France for private properties 05 April 2015 and for commercial properties 5 April 2018, the UK now retains primary taxing rights.
Should there be a French charge you will be entitled to the same relief on French capital gains tax as you would otherwise receive if the property was located in France. On that basis you will be entitled to relief based on the duration of ownership, and a credit for any tax paid in the UK.
The 2010 treaty overturns a previous rule in which there was an exemption from capital gains tax by the UK tax authorities on the disposal of the main residence for a period of five years, and which was also exempt from capital gains tax in France.
In addition, since 2015, the UK has also imposed capital gains tax on the sale of property of former residents, although only any gain since April 2015 if the correct declarations are made within specific time limits of the sale, and the final 18 months of ownership normally qualifies for relief. A tax-free allowance of £11,700 (2018/19) also applies. Individuals will pay at the rate of 18% or 28% on net gain, depending on their UK income tax bracket, if you have UK income
Written by Paul Flintham, International Financial Adviser, Beacon Global Wealth Management
Email: paul @ bgwealthmanagement.net; beaconglobalwealth.com
The information on this page is intended as an introduction only and is not designed to offer solutions or advice. Beacon Global Wealth Management can accept no responsibility whatsoever for losses incurred by acting on the information on this page. Beacon Global Wealth Management are not tax advisers, professional tax advice must be sought.
The financial advisers trading under Beacon Global Wealth Management are members of Nexus Global (IFA Network). Nexus Global is a division of Blacktower Financial Management (International) Limited (BFMI). All approved individual members of Nexus Global are Appointed Representatives of BFMI. BFMI is licenced and regulated by the Gibraltar Financial Services Commission (FSC) and bound by the rules under licence number FSC00805B. Beacon Global Wealth Management are members of FEIFA (the) Federation of European Independent Financial Advisers: https://feifa.eu/