To Sell or Not to Sell, That is the Question

Many people with properties in France are considering selling now that there is a ‘special deal’ on the capital gains tax laws. In a recent French Property Insider, we outlined the new developments on capital gains tax: “Wait Ten Minutes, the Capital Gains Tax Laws Will Change Again!“

To help you make a more viable calculation and therefore a reasonable decision, the Chambre de Notaires de Paris has provided an online ‘calculator’ to simplify it all for us. For a detailed explanation, download their pdf (in French) and for use of the online calculator, visit notaires.paris-idf.fr/.

The following is a translation of the online calculator to assist you:

CALCULATION OF REAL ESTATE GAINS

This calculator allows you to estimate the tax on capital gains to an individual resident in France (for tax purposes) on the occasion of the sale of a building built (house or apartment). Consultation with a notary will complete this information.

SALE

Date of sale  
Selling price €
Deductions* €
*(fees and taxes incurred in the sale: the cost of diagnosis, the agency in charge of the seller commission, etc…)

ACQUISITION

Date of acquisition  
Purchase price  €
Acquisition costs* €
*Fees of 7.5% of the legal cost or their actual amounts
Works*  €
*Fees of 15% of the acquisition only if the holding period is more than five years or for their full price actuals (on company invoices)
Costs of roads, sewage, other maintenance costs €

Now, let’s take a real example to help you even further. Let’s use my own apartment:

I purchased the apartment in the summer of 2000 in French francs valued in euros at approximately 215,000€. The fees at the time amounted to approximately 16,000€ and there is an automatic consideration of work done to the property of 15% applied against the capital gain of about 32,000€ (in actuality, much more has been invested over the years in renovation and decoration, but only certain kinds of improvements are considered deductible — such as adding a bathroom or kitchen, but simply cosmetic improvements are not deductible).

In this scenario, if the apartment were to be sold before year end 2014 at the current market rate of 14,000€ per square meter, the calculation would be as follows (which accounts for an appreciation factor of 12.5% compounded annually!):

Date of sale 31/12/2013
Selling price 980,000€
Deductions (agency fees, etc.) 69,000€
Date of purchase 15/06/2000
Purchase price 215,500€
15% Allowance for renovation works 48,487€

Capital Gains Tax: 126,454€

If this is true, then the net profit after 13 years of ownership would be almost 570,000€! Maybe I should sell!?

BUT, the longer the property is owned, the less tax that will be paid, and of course, appreciation should continue to rise over the future years.

Over the course of 30 years, when there will be no taxes paid, and using the same appreciation factor of 12.5% (although this may be unrealistic?), the property would be worth 6.5 million euros! Uh oh. Maybe I shouldn’t sell now after all, right!?

A bientôt,

Adrian Leeds

Editor, French Property Insider & Director of The Adrian Leeds Group, LLC

Email: [email protected]

P.S. If you’re buying a holiday home or investment property overseas, the cost of making that trade can be greatly reduced by working with currency specialists instead of relying on your bank to make the transfer. We work with currency specialists to help you make the most of your U.S., Canadian or Australian Dollor, or Sterling — Moneycorp, World First, and our newest partner, USForex. Find out how you can make your money go further — visit our Currency Exchange page.

P.P.S. FPI will NOT be published on Thursday, November 28th in honor of the Thanksgiving holiday.