The French government has announced a change in the capital gains tax system on second home sales in a bid to boost the French property market.

The taper relief system is to be changed so that from 2014 the required time of ownerships before a property is completely exempt from capital gains tax will be 22 years, down from the 30 year system which was ratified in September 2012.

Nicholas Leach, Partner at Athena Advisors, commented: ‘This could be considered as a bit of a u-turn by the government, reverting to a system which is similar to that of when Sarkozy was in power.

‘The changes in taxation were part of the reason why French home sales dropped at the start of 2013 and whilst the availability of attractive mortgages is stimulating property markets in touristic areas, Hollande clearly wants to re-invigorate domestic home sales too. Last year’s property tax changes put off many foreign buyers off buying French property and now with Hollande’s changes we may see some buyers return to the market.’

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  • alex

    On the 2nd of August the French Ministry of Finance disclosed a document with lots of information about the property capital gains tax reform.
    In a nutshell, the exemption after 22 years will be for the 19% tax part only, (with progressive rebate from the 6th year onward after acquiring the property), while the 15.5% CSG & CRDS charges will be completely exempted after 30 years, with a small rebate every from the 6th year to the 22nd year and then a much higher rebate after the 22nd year. The 25% additional rebate between the 1st of September 2013 and the 31st of August 2014 will be for both the tax part and the CSG & CRDS part. This lead to a very significant reduction of the amount to pay to the French state, which depends on the date you bought your property and the amount of capital gains. The additional capital gains tax above 50 000 euros is still on, however for a married couple or a non married but official couple the 50 000 euros (after applying the various rebates mentionned above) is considered for each partner, which means that if you get a 90 000 capital gains after all the rebates a couple will not pay additional 2% tax as for each of them 45 000 is below the 50 000 euros mark….
    Also remember that for calculating the capital gains, the selling price should be taken once you deducted the fees that you paid to an estate agent, if you plan to sell through an estate agent, and the tax rules allows you to inflate the acquisition price by a flat rate of 7.5% (acquisition costs) and also another flat rate of 15% for refurbishement if you own the property for more than 5 years (whether you did the refirbishment or not).
    There is a lot of information on the blog:[:)]
    http://frenchpropertytrend.wordpress.com/

  • Mal Knowles

    my notaire tells me the date for the time reduction to 22years will apply from Sept 1st 2013. Can you confirm this?