8 November 2017
By Thomas Marron
06 14 24 61 29
The Constitutional Court has just ruled that the main home capital gains tax and social charges exemption is only available to French residents. If you leave France, you will lose it.
Capital gains on the sale of a property in France are liable to both French tax and social charges. Your home is exempt from both, provided it is your main home at the time of sale. There is a 12-month ‘grace period’, but the Constitutional Court has just ruled that this does not apply if you have left France.
When you sell a French property, it is liable to capital gains tax at 19% plus a surtax ranging from 2% for gains over €50,000 up to 6% for gains over €250,000. You also need to pay social charges, currently 15.5% but rising to 17.2% under the 2018 budget. A taper relief system lowers both these taxes the longer you have owned the property.
The main home is exempt from both tax and social charges, provided it is your habitual and actual residence at the time of sale.
If you leave a property without having sold it, you could lose the main home relief entirely when you do come to sell it, even if you lived in it for many years beforehand. There is no ‘time-apportionment’ for periods of occupation.
However, there can be a 12-month breathing space if things are done properly. The main home exemption can apply for up to one year from the date you vacate the property and put it on the market – it still needs to be your actual and habitual main residence when you put it up for sale. You cannot rent the property out until you sell it, and need to be able to show you have done your best to find a buyer.
Previously it was understood that the 12-month grace period applied even if you left France to establish residence in another country.
But now, following a court case at the Versailles administrative court, on 27th October 2017 the Conseil Constitutionnel ruled that the grace period is only applicable to French tax residents and it does not apply to persons who have left France and become non-residents.
So if you are planning to leave France, you may wish to put your property on the market sooner rather than later so that you have a chance to sell it before you leave the country.
If you have no choice and have to leave before you find a buyer, contact Blevins Franks to find out what other exemptions you may be able to benefit from to lower your tax liabilities. Blevins Franks also provides a comprehensive advisory service for those leaving France, to help you make the most of all tax opportunities and structure your finances correctly and effectively.