A proposal to change the taxation system for second homes, reducing rates in certain circumstances, was put forward by a member.
Under current rules, owners of second homes in France are taxed on capital gains when selling real estate (the tax is based on the difference between the initial purchase price and the sale price). ), with a few exceptions.
These include discounts for first-time second home sellers who plan to use the funds to build or buy a primary home, or second home owners who have owned their property for over 30 years.
These rules impact the real estate market, because owners of second homes are encouraged to keep their property longer in order to benefit from tax advantages.
However, LREM MP Romain Grau has now suggested that in 2022 the rules should change to remove capital gains tax on properties other than primary residences (on which it is not payable) if at least a quarter of the capital gain on the sale is allocated to the financing of a company owned by the seller, or the creation or takeover of a sole proprietorship within 12 months.
According to the rules, capital gains of up to € 250,000 would be tax exempt for each property.
The proposal said: “Such a measure would by nature encourage the transfer of savings to the production of goods and services.” “
Mr Grau said the measure would be financially viable, as tax losses on second home sales would be recouped as the money entered the taxable economy.
The suggestion is expected to be discussed by the National Assembly’s finance committee today (October 5), during discussions on the 2022 budget.
How does the real estate capital gains tax work in France?
Outside their main residence, French residents pay the tax on world property gains (including shares in real estate companies) at 19%, plus social charges at 17.2%.
However, double taxation treaties may come into play to offset any capital gains tax also payable in another country on the sale (for example, any UK CGT paid on a sale allows for a reduction of any French CGT invoice. )
Capital gains tax is reduced by certain percentages depending on the length of ownership, from the sixth year and with total exemption after 22 years. Total exemption from social charges comes after 30 years of possession.
For French residents, your main residence in France is exempt from capital gains tax – provided that it is your usual and effective residence at the time of the sale, and that you are subject to the regime. French tax.
French and EU / EEA nationals who have moved abroad are entitled to an exemption on the gain made on a French residence, under certain conditions.
The exemption is limited to € 150,000 of net capital gain and is only available once. The property on which you realize the capital gain does not necessarily have to be your main residence at the time of sale and can be rented out.
The beneficiary must have previously been at a certain stage a French tax resident for at least two consecutive years and the sale must take place at the latest at the end of the fifth year following that in which he left France. The last condition is lifted if the property is at their disposal (that is to say not rented) at least since January 1 of the year preceding that of the sale.
Owning real estate in France: tax issues to consider