Capital Gains Tax the rules and rates that apply on the sale of a French property
Technical Notes: Disposal of A French Property
A BRIEF INTRODUCTION TO THE FRENCH & UK TAX TREATMENT OF ANY GAIN
Please note that this page represents the situation up to 31/12/20.
We are currently updating our website to present the situation from 01/01/21. The main changes for a UK tax resident being the need to appoint a Fiscal Representative if the sale price exceeds 150 000 Euros and the rates applied for prelevement sociaux have changed.
Gains made from the sale of French property owned directly by an individual or individuals are liable to Capital Gains Tax in France. Equally, if the individual is resident or ordinarily resident in the UK, the disposal of the French property will also be subject to UK Capital Gains Tax.
Although a Double Taxation Treaty exists between France and the UK, the purpose of the agreement is not to allow the individual to "choose" in which country to pay the tax, nor is it designed to allow tax to be paid in only one country and not the other. Instead, the treaty simply allows that for a UK resident, any French tax paid will be credited against the UK tax arising from the same gain.
This introductory report does not cover gains made from the sale of a property by a UK Ltd Company, or gains made from the sale of shares in a Ltd Company.
Please contact our office, if the sale involves a Ltd Company.
Regarding the sale by an SCI (Société Civile Immobilière) the information below explaining the French tax treatment is also valid. However, the UK tax position is different. The explanation of the UK tax treatment and consequences of sale by an SCI is found in our note
The report is based on legislation current for the UK tax year 2019/2020 and French Finance Acts of 2019.
The following summary describes the assessment of gains from the sale of private assets realised on or after 01/01/2019, (Régime des Plus-Values Privées). This does not apply to property which forms part of the assets of a professional business, such as “location en meublé professionnelle”. The description also does not apply to the disposal of a property by a UK ltd company or any other commercial company.
Please refer back to our office if you believe your property transaction falls within any of these categories.
In general, apart from both jurisdictions applying tax on the gain and identifying the gain as the difference between the sale price and the purchase price plus enhancement costs,
1. TAX RATE SINCE 01 JANUARY 2019
1.1 IMPOT SUR LE REVENU
This is levied in all cases at a flat rate of 19%
There is no annual allowance – the rate is applied from the first Euro - but instead a taper relief is applied to reduce, (and potentially exempt), the gross gain,
1.2 SUPPLEMENTARY TAX CHARGE ON LARGER GAINS
When the taxable gain exceeds 50.000€ per owner a supplementary tax charge will apply on the whole gain at the following rates shown in the table overleaf.
1.3 PRELEVEMENTS SOCIAUX
As with Impôt sur le Revenu (“I.R.”) there is no annual allowance – the rate is applied from the first Euro - but again a taper relief is applied to reduce the gross gain, albeit at a slower rate than the taper relief for I.R.
The default position is that PS will be charged at a flat rate of 17.2%, comprising 3 components:
- Contribution Sociale Généralisée (CSG) levied at 9.2%
- Contribution au Remboursemnent de la Dette Sociale (CRDS) @ 0.5%
- Prélèvement de Solidarité @ 7.5%
- Total 17.2%
For technical reasons, the default charge rate can be reduced to 7.5% – with the taxpayer being exempt from the CSG and CRDS components – if they can prove that they are, at the time of disposal, not subject to a French obligatory national insurance scheme and instead subject to the National Insurance legislation of another EU or EEA member State or of Switzerland.
In the event you are charged with CSG and CRDS components, Charles Hamer’s full French CGT service includes assessment, preparation and presentation of the claim at the point of sale or for recovering overpayment post sale.
Post Brexit (transition period ends 31/12/2020), unless the UK adopts the EEA route or participates as a special status 3rd State like Switzerland, Regulation 883/2004 and all the protections it offers will no longer apply.