If you make direct or indirect capital gains:
during the sale or transfer for valuable consideration of property located in France
or during the sale or transfer for valuable consideration of shares in a company whose assets are essentially properties located in France
The capital gains will be subject to a 19% levy irrespective of your country of residence, as well as social levies at 15.5%.
Paragraph 2° of II of Article 150 U of the General Tax Code stipulates an exemption for capital gains made on the disposal of an accommodation unit located in France by individuals, who are not residents of France and who are nationals of an EU Member State or of another country party to the Agreement on the European Economic Area (EEA) which has signed a mutual administrative assistance agreement with France to fight tax evasion and tax avoidance.
Civil servants and government officials posted abroad, who are residents of France for tax purposes, are entitled to this exemption.
The exemption does not apply when the property is owned through a legal entity (i.e. a property holding company, SCI).
Conditions for 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.
Common law spouses or undivided co-owners
Both common law spouses and undivided co-owners each? represent a sole seller and capital gains are taxed separately for them. The €150,000 capital gains exemption cap is assessed individually on the portion of the capital gains made by each common law spouse or undivided co-owner.
Married couples or co-sellers
When a property is sold jointly by a married couple, the spouses are deemed to be co-sellers. Nevertheless, the €150,000 upper limit for the capital gains exemption may be assessed in the same way as for undivided co-owners on the basis of the share of the property owned and, therefore, on the capital gains attributable to each spouse and not on the total capital gains made by the couple. Therefore, a married couple could claim an exemption capped at €300,000 of the total capital gains if they sell a jointly-owned property.
The proportion of the capital gains over €150,000 is taxed under ordinary law conditions.
These arrangements are subject to compliance with the following requirements:
The seller must have been continuously resident of France for tax purposes for at least two years at any time prior to the sale
The sale must be made by 31 December of the fifth year following the year when the seller transferred his residence for tax purposes outside France [the sold property's status since the transfer of tax residence is not taken into account (rented out or free disposal)] or, with no conditions as to time limits when the seller has had free disposal of the property at least since 1 January of the year preceding the sale
The seller must not have already benefited from this exemption since 1 January 2006
Furthermore, non-residents are not entitled to the exemptions available in the event of sale of the main residence or for the first sale of a property which is not the main residence.
Calculating the tax
You are a non-resident and make capital gains which are taxable in France. The tax is calculated according to the same conditions applying to residents of France with an allowance based on the duration of ownership being factored in.
To calculate the amount subject to income tax, this allowance is:
6% for each year of ownership subsequent to the fifth year up to the twenty-first
4% subsequent to the twenty-second year of ownership
Overall, exemption from income tax is granted after twenty-two years' ownership.
For social levies, the allowance based on the duration of ownership is:
1.65% for each year of ownership subsequent to the fifth year up to the twenty-first
1.60% for the twenty-second year of ownership
9% for each year subsequent to the twenty-second
Exemption from social levies is granted after thirty years' ownership.
For the sale of property or property rights, form no. 2048-IMM-SD must be filled out.
For the sale of the shares of companies investing predominantly in property, form no. 2048-M-SD must be filled out.
Please note: These forms can be downloaded from this website (using the search engine).
Appointment of a tax representative
Three situations allow for automatic dispensation from appointing a tax representative:
When the seller lives, is based or is incorporated in an EU Member State or in another country party to the Agreement on the European Economic Area (EEA) which has signed a mutual administrative assistance agreement with France (Iceland and Norway)
For sales of €150,000 or less This upper limit is assessed for each seller.
For sales allowing for capital gains exemption both in terms of income tax and social levies owing to the duration of ownership of the property (22 years for income tax and 30 years for social levies)
Capacity of tax representative
The following may be tax representatives:
A company or organisation already permanently accredited by the tax authorities
Banks and credit institutions carrying on their business activity in France
The buyer of the property if he is resident of France for tax purposes
Or any other person who is resident of France for tax purposes, except notaries and lawyers. In the latter category, the representative must be accredited by the tax authorities.
Departments tasked with processing applications for the appointment of an accredited representative
Accreditation may be applied for from the département or regional public finances directorate having jurisdiction over the location of the property or the registered office of the company investing predominantly in property (sale of shares).
When the property is located in Paris, accreditation must be applied for from the Ile-de-France Regional Public Finances Directorate (département de Paris - Missions foncières, 6, rue Paganini, 75020 Paris, Tel: +33 1-53-27-46-45).
When the registered office of the company investing predominantly in property (sale of shares, stock or rights) is located abroad, accreditation must be applied for from the DRESG (Directorate for Residents Abroad and General Services) 10 rue du Centre, 93465 Noisy-le-Grand Cedex.
When the sale is concluded, the notary pays the tax owed (income tax and social levies).
If other income liable for income tax is received in France, the amount of capital gains must be declared in form no. 2042 C (box 3VZ) so that it may be included in calculation of the base taxable income.