TAX WHEN SELLING
I have owned an apartment in the French Alps since 2009. I bought it for around €190,000 and I guess it is worth €250,000 now. I have maintained reasonable accounts since the purchase which show that my costs have exceeded the modest rental income I have received. Is it possible to summarise the taxation situation if I sold? Should I sell, I would like to use the money to buy another French property. Bringing the money back to the UK would be an alternative option. DAVID WILSON
I will start by saying that a principal private residence is not subject to capital gains tax (or plus-value) in France, so if you are living in the property or could do so for a spell, capital gains tax is not a consideration.
The capital gain is the acquisition price, including the cost of purchase, minus the disposal price, including the selling costs. Certain structural costs and property improvement costs may be offset. A claim may not be made on these costs, where offsets have already been received against income tax. Generally, for private individuals, the rental income received does not affect the capital gains tax calculation in any way.
General expenses from the management of renting the property may not be claimed at all, as these would be offset against income tax, not capital gains tax.
The good news is that there are some standard allowances, where no evidence of expenditure is required. A flat rate of 7.5% may be used when assessing the acquisition cost of the property (CGI 150VB 3).
Where a taxpayer is selling a second property (so resident in France), after five years of ownership, and is not able to provide the justification for home improvement expenditures, a fixed allowance of 15% of the purchase price may be used (CGI 150VB 4). The tax rate applicable is 19% and the social charge is 15.5%.
Full exemption of capital gains on property and social security contributions will be acquired after a period of detention of 30 years. The allowance increases each year, but is very much weighted towards the end. You should also bear in mind that there is also an additional capital gains tax for gains above €50,000.
As it is a French based property, it is the notaire dealing with the sale who will calculate and apply the tax. With this in mind, I would say that finding a helpful notaire is a good place to start. ROBERT KENT