CASES OF EXEMPTIONS OF CAPITAL GAINS ON PROPERTY SALES
If you make a profit when selling a property, this profit is in principle subject to capital gains tax.
Taxation is at the fixed rate of 36.20%: 19% in the form of income tax 17.20% in the form of social contributions.
An additional tax is applied to net capital gains in excess of €50,000.
However there are a certain number of exemptions.
1/ The sale of the primary residence
When the property is the seller’s effective primary residence on the day of the sale, i.e. the home effectively occupied by the seller as well as any immediate and necessary ancillary properties sold at the same time (e.g.: garage or cellar), there is no problem: the seller is totally exempted from capital gains.
The exemption can also apply when the seller has moved out but the property was his/her primary residence when it was put on the market. However the sale must take place within a period considered to be normal by the tax authorities (a period of one year will always be accepted).
Similarly, in case of a sale of the property following a separation or divorce, the exemption may also apply to the person who left the home.
Finally when the seller has left his/her primary residence to live in a specialised institution (e.g.: a nursing or retirement home), the seller may benefit from the exemption subject to means testing if the sale takes place within two years of entering the institution and the property had not been occupied since the seller’s departure.
2/ Thirty-year holding
A deduction is applied to the capital gain made for each year the property is held starting from the fifth year (see table opposite).
The result of this deduction is that no tax is due if the property is held for 30 years.
3/ The sales price of the property is less than or equal to €15,000
No tax is due if the sales price is less than or equal to €15,000. In case of co-ownership, this threshold applies to each person’s share. So for example when each member of a couple has 50% of a property sold for €30,000 neither will have any tax to pay. If a property is sold in which the property rights were separated between usufruct and bare ownership rights, the threshold of €15,000 applies to each fully owned share.
4/ The sale of a property with a view to acquiring a primary residence
When a seller sells a property for the first time, the seller may be exempted from tax subject to the dual condition that he/she is not the owner of his/her primary residence (nor was owner of it at any time in the last 4 years) and that he/she undertakes to use the money from the sale to buy or build a primary residence within 2 years.
5/ The beneficiaries of old-age pensions or holders of disability cards are exempt under certain conditions
An old-age pensioner or holder of a disability card within the classification provided for by the social security authorities, may be exempt from capital gains subject to a means test.
As regards non-residents, for the first sale of a property taking place after 1 January 2006, an exemption of 150,000 euros applies on condition that:
- The seller can establish that all of his/her income was fiscally domiciled in France on a continuous basis for a duration of at least two years at some time prior to the sale.
- The seller freely disposed of the property since 1 January of the year preceding the sale if the seller no longer had his/her tax residence in France for over 5 years.
- The seller is a natural person who is a citizen of a Member State of the European Economic Area (excluding Liechtenstein).