What are the cases of exemption from capital gains tax for French people and for foreigners selling their property in France?
The capital gain sale may be subject to income tax and social security contributions. However, there are some exceptions, as some disposals may be exempted. What cases are subject to an exemption from capital gains tax?
The transfer of the principal residence
This is the main case that is subject to a capital gains tax exemption. Whether you sell an apartment, a cottage or a house, the sale is always tax exempt if it is a principal residence.
The outbuildings are also concerned by the exemption. The only condition is that they must be sold at the same time as the principal residence. Then, the move cancels the effect of the exemption. The reason for this is that at that time the property is no longer considered a principal residence.
The effect of the length of time the property is held
The taxation decreases the longer you hold your property. Each year that passes, you benefit from an abatement on the taxable capital gain. After 22 years of ownership, the sale will be tax-free. After 30 years of ownership, it will be exempt from social security contributions.
Fractions of years do not count, as the period is calculated from date to date. Thus, only the date of the final deed counts to start the calculation. In the case of a property received by inheritance, the date used is that of the donation or that of the death. On the other hand, the date retained for the residences built by the salesman is that of the beginning of work.
The sale of a secondary residence with conditions
The sale of a secondary residence is tax exempt. However, some conditions must be met. It must be the first sale of the secondary residence. This regulation applies since February 1, 2012. Then, the reuse of the sale price to purchase a primary residence is required. The seller can reuse all or part of the amount. Moreover, it is the reinvested price that is subject to the exemption. Then, the secondary residence is exempt from tax if the seller has not owned a principal residence during the 4 years prior to the sale.
The former residence of retired and/or disabled persons
The principal residences of the elderly and disabled adults are exempt from taxes. These residences must not have been occupied for at least 2 years prior to the sale. However, one member of the household and a cohabitant are the exception to this rule. Then, the sale is tax exempt if the reference tax income is less than 26,097 euros for the first part of the family quotient and less than 4,800 euros for each additional half part.
The residences must not be subject to the IFI or tax on real estate wealth.
Real estate capital gains resulting from expropriation
The capital gain is exempt from tax if the expropriation is preceded by a declaration of public utility. The transfer to local authorities cancels the exemption. The capital gain is also tax-exempt if the expropriated party reuses the entire indemnity by acquisition.
Sale of a residence in France by a non-resident
If an owner has a tax residence in France and wishes to transfer it outside of France, then he/she benefits from an exemption. The transfer must be made to a member state of the European Union. The sale must take place no later than the end of the year following the year of the transfer. It is also necessary that the housing was not rented or lent as from the moment when the salesman left France.