Capital Gains Tax changes for non-residents on the sale of property in France
Reproduced with the kind permission of Christophe Dutertre, www.francetaxlaw.com
Social charges on capital gains tax
Non French residents have suffered a high tax rate of 36.2% on CGT on the disposal of their French property that is not their main residence, Since the DE RUYTER case in 2015, the French government found another route to carry on taxing social contributions on CGT. It seemed unfair for non French residents to pay social contributions for a service that they would not benefit from in France. The 2019 financial bill has finally put an end (partial to be precise) to this discrimination or injustice.
Social contributions will be abolished for CGT tax payers who are not covered by the French “securite sociale” but are affiliated to another health regime in another country of the EU or the EEA (including Iceland, Liechtenstein, Norway and Switzerland. The social contributions will be replaced by a new levy tax of 7.5% making a total taxation on CGT of 26.5% from 2019 instead of 36.2%.
However, the new regime only applies for E.U members and non E.U members will continue paying the full tax rate of 36.2% (19% of CGT + 17.2% of social contributions). The main question will be the consideration of British citizens in the near future. Will they still benefit from the low tax rate of 26.5% or will they revert to 36.2%?
It is probably advisable for those who have properties for sale to make sure that completion takes place before the 29th March 2019.
Capital Gains tax
A new episode regarding exemption of CGT for non residents has been inserted into the new financial bill. Non-residents, individuals, who dispose of their French properties in France, benefit from most of the exemptions provided to resident taxpayers. However, until 31 December 2018, they could not benefit from the total exemption of capital gains on the sale of the principal residence reserved for residents only.
From the first of January 2019, non-residents are now exempt from any capital gains tax on the sale of their property that constituted their main residence at the time of their relocation outside France. Three conditions must be fulfilled (CGI article 244 bis A, I.1.al. 4):-
– the sale is completed before the 31st December of the year following the year of the transfer of domicile
– the property should have been vacate during this period
– The tax payer transfers his residence to an EU State or part of the EEA (Norway, Iceland and Liechtenstein).
Failing to fulfil these conditions, non-residents continue to benefit from the specific exemption in case of sale of the housing in France, capped at 150 000 EUR of taxable capital gain, without being able to combine the two exemption schemes (CGI 150 U, II.2 °).
Diposals of properties from the 1st January 2019, the benefit of this specific exemption applies if the tax payer is a National of an E.U or EEA Country, he was French Tax resident at any time before he relocated and the sale must be completed within a period of 10 years after he relocates (the previous period was 5 years)