All you need to know about Capital Gains tax on your property in the Dordogne

When selling a property in France any gains arising from its disposal can be subject to capital gains tax (CGT).

The French CGT system purports similarities with the UK CGT collection. For instance, the sale of your main residence will usually not trigger any CGT.

Calculating your capital gain involves deducting the purchase price from the sale price. The estate agent commission, notary fees and, if applicable, the costs of renovation provided that proper receipts have been kept. This simple calculation should give you an approximate figure to assess if any liability to CGT will be triggered.

Although the basic rules are similar, the way CGT itself is calculated in France is somewhat different from its British counterpart. At this stage, it is important to bear in mind that, if you sell within 5 years of the purchase, you will usually not be allowed to deduct the cost of renovation. After 5 years, a taper relief of 10% can be applied each year. This means that no CGT will be paid if the property has been held for 15 years. Other exemptions may apply to a particular sale but to simplify the calculation, the example below will not take these into account.

Example: A property was purchased on 31st July 1999 and sold on 1st April 2009. Capital gain equals to €20,000. Nine full years have passed since the purchase. There are no deductions for the first 5 years and then 10% per year for the next 4 years.

Taxable capital gain = 20,000 – 40% = €12,000

CGT applied to the taxable capital gain is different whether the seller is a French resident or not. In the first instance, a 28.1% tax is levied (from the previous example, CGT would therefore be €3,372). However, non French residents will be subject to a 16% tax (from the previous example, CGT would therefore be €1,920). Capital gain from a property in France may also be taxed in the UKalthough CGT paid in France can be offset.

Residence is also an important element to take into account. Where non French residents sell a property over €150,000, the seller will need to appoint a tax representative.

If a property is sold with furniture and other contents, a list attached to the sale contract proving the existence of such contents is necessary. This document allows the seller to exclude the value of the content from any CGT calculation.

CGT is an important part to consider during the sale of a French property but this is by no means the only element to take into account. It is therefore important to anticipate such operation and the assistance of a specialist certainly helps.

Guillaume Barlet is a French lawyer specialising in French assets and wealth management issues for Bank House Investment Management Limited. Guillaume can be contacted by e-mail or by telephone on 01242 520074.