TAX WHEN SELL­ING

Living France - - The Essentials -

Q

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

A

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

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