La Loi de Finance du 1er Janvier 2004 - Law Effective January 2004 Exemption of Capital Gain Tax:
Amongst others, the following exemptions from CGT are specified:
1. Main residence of the owner on the day of sale. 2. The dwelling in France of physical persons who are not French resident but who are European Union citizens, with a limit of one residence per tax payer and under the condition that they have been fiscally domiciled in France in a continuous way for at least two years at any time prior to the sale; 3. The adjoining and necessary outbuildings of properties mentioned in the above two paragraphs provided that they are sold at the same time as those properties; 4. When the sale price is less or equal to 15,000 Euros. 5. In the case of expropriation generating a capital gain. In this case, if the sale is followed by a purchase in property within 12 months, there will be exemption.
Expenditure That Can Be Offset:
Construction, reconstruction, extension, renovation or improvement works which are borne by the vendor and undertaken by a company from the time of completion of construction of the property or its purchase if later, provided that the cost has not been offset for income tax purposes and it is not rental expenditure (e.g. works such as simple redecoration). When the tax payer sells a property five years after purchase and is not able to provide proof of the expenditure, the original purchase price is increased by an amount equal to 15% thereof (to represent the cost of the works).
For each year of ownership beyond the first five years since purchase, the capital gain is reduced by 10%. This means that upon fifteen years of ownership, the reduction is 100% and there is - no CGT to pay. - Tax free allowance
For any sale, there is a tax free allowance of 1,000 Euros.
Time of Payment:
The tax has to be paid at the time of sale and will be taken from the sale’s proceeds (the system that already applied to non-residents). The tax return is made at this time and no longer forms part of the annual income tax return.
* 26 % for the French Residents * 16 % for the residents of an EU country (except France!) * 33,33 % for the residents outside of the EU Example on how to calculate the capital gain tax :
For an apartment bought in 1995: Price of purchase 100,000 euros + 9,000 notary fees. Works were done for a veranda in 2000: paid 17,000 euros. Resale in 2004 for 200,000 euros 6% of which are agency commission.
Net sale: 200,000 - 12,000 = 188,000 (price less agency commission) Purchase cost: 100,000 Notary: 9,000 Works: 17,000
188,000 - 126,000 = 62,000 (gross capital gain) 62,000 - 40% (10% reduction per year after 5 years) = 37,200 37,200 - 1,000 (tax free band) = 36,200 36,200 x 16% = 5,792 TO PAY for a non-resident 36,200 x 26% = 9,412 TO PAY for a resident