Determining Taxable Capital Gains
Calculation basis
The capital gain is calculated as the difference between the sale price and the purchase price. The purchase price generally includes acquisition costs, either the actual registration costs paid on purchase or a flat rate of 7.5%. For property acquired by gift or inheritance, the declared value is used.
Works and improvement costs
The purchase price may be increased to reflect qualifying construction, reconstruction, extension or improvement works, provided the costs were paid by the seller, carried out by a company and supported by invoices. Routine maintenance and repair costs, including major repairs, are excluded, as these are intended only to maintain or restore the property.
Alternatively, where the property has been owned for more than five years, the seller may elect to increase the purchase price by a flat-rate 15% (but he may need to provide evidence of at least some works). This flat-rate increase is an alternative to claiming actual costs and cannot be combined with them.
Reduction based on holding period
Different rebates apply when calculating the taxable base for income tax and social security contributions:
- Up to 5 years: no reduction
- Years 6–21: 6% per year for income tax; 1.65% per year for social contributions
- 22nd year: 4% for income tax; 1.6% for social contributions
- After 22 years: full income tax exemption
- After 30 years: full exemption from social contributions
As a result, capital gains are fully exempt from income tax after 22 years of ownership and from social security contributions after 30 years. The holding period is calculated from the anniversary of the acquisition date (purchase, gift or death).
Tax rates and payment
Capital gains are currently taxed at a flat income tax rate of 19% and social security contributions of 17.2%, both subject to the above reductions. The notary deducts the tax from the sale proceeds at completion and pays it to the French Tax Authorities.
An additional surtax of 2% to 6% may apply where the net capital gain exceeds €50,000 (excluding building land).
Non-EU sellers
Sellers resident in the UK must appoint a tax representative. Their fee is typically around 0.4% of the sale price.
