Good news for anyone who has a second home in France and is worried they aren’t doing enough to help the French economy – you’re about to start!
As part of the proposed budget changes in France it is planned that capital gains tax will be payable on any gain you make when you come to sell up. (The rules have not yet been signed off so they might change.)
Previously the rule was that after 5 years of ownership the tax liability was reduced by 10% a year, so no capital gains tax at all was payable after 15 years – so that house you bought for 5000 euros in 1975 and is now worth 200 000 euros could be sold without paying any capital gains tax.
But now when you come to sell you will have to pay tax on the full 195 000 euros gain (less an inflation allowance and any bills you have for work on the property). Let’s say 50000 euros to you, sir.
If you live outside France the rate is around 19%, if you live in France and own a second home or gites the rate is around 32 % (because it includes 12% social contributions as well as capital gains tax). Everyone of course still pays the normal fees – typically 7% for estate agents fees and a similar amount for notaire fees based on the whole value of sale).
So total charges could be getting close to 40% – 50% of the sale proceeds if you’ve had the house a long time…if the intention is to kill the property market this sounds like quite a good plan, otherwise less so.
I think that the worst hit will be people who bought an old ruin for a very low price, renovated it themselves (invoices from registered tradesmen are deductible but your own labour isn’t) and now hope to sell it for a decent profit. But any owners of second properties and gites in France will be wanting to keep an eye on developments and checking their own situation.
Note: certain exemptions apply if you sell a property in France having previously been tax resident in France (for at least two years) but are now resident elsewhere. If this exemption still applies after the rule changes it would suggest you need to move back to the UK before selling your property in France. You can always come back later!
I’m guessing that lots of French politicians will have expensive second homes tucked away in their own little corners of France and won’t much fancy the idea of paying a third of the proceeds over as tax, so the law might struggle to get approved, but politics works in mysterious ways…
I’ll add more information here as soon as I become aware of it, and anyone who knows more about the rules please share it in the comments below!