Capital gains on the sale of property
How is a capital gain made by a non-resident taxed?
You are a non-resident and realise a capital gain directly or indirectly :
- on the sale or transfer for valuable consideration of a property located in France
- or on the sale or transfer for consideration of shares in a company whose assets consist mainly of real estate located in France.
In these cases, your capital gain will be subject to 19% tax, regardless of your country of residence. It will also be subject to social security contributions at the overall rate of 17.2%.
Since the taxation of property income received in 2018 and capital gains on property made since 1 January 2019, persons affiliated to a compulsory social security scheme, other than French, in an EEA country (European Union, Iceland, Norway, Liechtenstein) or Switzerland, are exempt from the general social contribution (CSG) and the contribution to the reimbursement of the social debt (CRDS). Although the United Kingdom left the European Union on 1 January 2021, British residents continue to benefit from this exemption from CSG and CRDS.
However, such income remains subject to a solidarity levy at the rate of 7.5%.
What exemption can you benefit from?
Total exemption on the sale of your main residence in France
Article 244 bis A I of the French General Tax Code (CGI) provides for an exemption from capital gains tax for non-resident sellers on the sale of the home that was their principal residence in France before they moved abroad.
At the time of the sale, the seller's new residence must be located in a Member State of the European Union or in a State that has concluded an administrative assistance agreement with France to combat tax evasion and avoidance and a mutual assistance agreement for tax collection.
The exemption applies provided that :
- the non-resident transferor has had free disposal (no free or paid disposal) of his former main residence located in France between the departure from France and the transfer;
- the transfer must be made no later than 31 December of the year following the year in which the transferor transfers his tax residence outside France.
These conditions are cumulative. If they are met, the exemption from capital gains tax exempts the non-resident seller from filing a capital gains tax return. The deed of sale must therefore mention the basis for the exemption. The non-resident seller who benefits from the exemption from taxation on the basis of article 244 bis A I of the CGI cannot apply for the specific exemption provided for in article 150 U II 2° of the CGI. (see below).
Exemption up to €150,000
As from 1 January 2019, a non-resident who sells property which was his/her main residence in France on the date he/she transfers his/her tax domicile outside France (EU Member State or countries which have signed a mutual administrative assistance agreement to fight tax evasion and tax avoidance and a mutual administrative assistance agreement for tax collection with France) may have his/her capital gains on the sale of property entirely exempted from tax subject to two conditions:
- The sale is carried out by 31 December of the year following the year in which the tax domicile was transferred outside France at the latest,
- The main residence has not been made available to a third party between the transfer and the sale, either free-of-charge or for valuable consideration.
Employees of the central government, a regional/local governement or the hospital civil service posted abroad, who are residents of France for tax purposes, are entitled to this exemption.
The exemption is limited to one residence per taxpayer and is capped at €150,000 of taxable net capital gains.
This exemption cap is assessed vis-à-vis the seller.
UPDATED DINR PART – JULY 5, 2022