Capital Gains tax part 3

In which circumstances must one have a fiscal representative  ?

You need an accredited representative except  in cases which provide for automatic dispensation.
Automatic dispensation applies in the following two cases :
Sale of real estate where the price is equal to or less than 150 000 €
Sales of real estate  benefiting from capital gains relief due to the fact  that the asset has been held for more than thirty years.
Please note : Civil servants et public officials seconded abroad  who are still French tax residents are note concerned by this.
The representative can be :
- A company or organization already permanently accredited with the French tax authorities
- A bank operating in France
- The purchaser of the real estate asset provided he is a tax resident in France,
- Any other person who is a tax resident in France.
In that case, accreditation must be granted by the tax authorities prior to publication of the official act of sale. This  must be requested from  the following :
(L’Inspection de fiscalité immobilière du Centre des impôts du lieu de situation de l’immeuble )
Or, in the case of buildings situated in Paris
(La DFRIP  d’Ile de France  et du département de Paris , Gestion Fiscale, Centre Missions Foncières, 6 rue Paganini 75020 Paris téléphone : 01-53-27-42-78 )

How does one pay capital gains tax  ?

Capital gains tax is paid by the ‘notaire’ (notary public responsible for real estate transactions in France).
If you are in receipt of any other income in France upon which income tax is  due (as per your 2042 tax form) the amount of capital gains tax due  must be indicated on  the  2042 C tax form in the 3VZ cell. This ensures that it will be included in the computation of the tax revenue reference basis (realized capital gains as from January 1st 2011).

Which forms need to be completed ?

In the case of disposal of real estate assets or rights : tax form  2048 – IMM – SD
In the case of disposal of shares in companies : tax form 2048 – M - SD
Please note : tax forms can be downloaded on the internet site called www.impots.gouv.fr .
You can indicate the reference number of the  form requested ( rubrique ‘ recherche  de formulaires’)

Capital gains tax part 2

What exemptions/abatements are available to a non- resident in calculating his liability to capital gains on disposal of real estate  ?

The tax relief  normally applicable for a main residence  (‘residence principale’) does not apply in the case of fiscal non - residents ( considered non - resident for tax purposes).  This is because, by definition, they do not have their main residence in France. The further exemption applicable in the case of the first sale of a place of residence (dwelling place) is not applicable to non –residents either.
If you are non – resident , you may however have the benefit of a special abatement for your place of residence if situated in France ( as par article 150 II 2° of the  ‘Code Général des Impôts’ CGI  (General Tax Code), if the following conditions apply :
When the sale of the asset  occurs in the five years following the year in which you leave France :
If you are a national of one of the member states of the European Economic Space, or of another state if a tax convention allows it
If you can prove that you had fiscal residence status in France during at least two consecutive years prior to the date of disposal of the asset .
When the sale of the asset occurs more than  five years following the year in which you leave France a further condition applies :
The real estate asset must be your place of residence in France. You must have had free possession of it since January 1st of the year preceding the date of the sale.
Provided such conditions apply, tax relief is limited to 150 000 € of the capital gains tax due. Tax relief  is limited to one residence per taxpayer.

Capital gains tax part 1

Today I would like to introduce to you, the french capital gains tax system.

You are selling real estate located in France (capital gains on sale of real estate assets)

If you are a resident overseas and selling real estate located in France you could be liable for tax payment based on capital gains resulting from the sale.
Please note : if you need to know  whether you are considered to be fiscally resident or not please consult the section ‘ where are you resident for tax purposes? ’ )

What is the tax liability on capital gains with respect to non – residents ?

The tax computation itself is identical as between a resident and a non - resident. The only difference is the rate of tax due.
19% if the non - resident is ‘fiscally located’ in a member state of the European Economic Area (EEA) (member states of the European Union + Liechtenstein, Iceland and Norway) ;
33 1/3% if the non –resident is ‘fiscally located’ in another state and that state is not on the list of non-cooperating states or territories *.
75% if the non – resident is ‘fiscally located’ in or established in a non-cooperating state or territory.
Please note : Monaco, Andorra, French Polynesia, New Caledonia and St Pierre et Miquelon are not members of the European Union. In the case of those territories the tax rate applicable is 33 1/3%.
As from August 17th 2012,  capital gains realized by non – residents on disposal of real estate assets are subject  to social deductions (CSG, CRDS…) at a flat rate of 15.5%
*Within the definition of article 238-OA  of the ‘Code Général des Impôts’ CGI  (General Tax Code). List of non – cooperating states and territories en 2012 : Botswana, Brunei, Guatemala, Marshall Islands, Montserrat, Nauru, Niue and The Philippines.

Local taxes you have to pay as an owner

According to french law,  two local taxes applied to real estate in France : 

The French Embassy in Washington's internet site highlights this topic :

"Residence tax: (taxe d’habitation) : this tax is due by any person who uses a furnished property. If the property is inhabited or if the tenant did not pay the tax, the owner is liable for its payment. This tax is calculated by applying the rate set by local jurisdictions and based on the official Land Registry rental value. The residence tax is assessed on a yearly basis. The tax is due on January 1st of each year. No rebate is granted if the property is sold or if the occupant moves out during the year. Non-residents cannot benefit from any reduction or relief.

Real estate tax: (taxe foncière): This tax on lands and buildings is assessed on a yearly basis. Is is due by any person who own a property on January 1st of each relevant year. New constructions benefit from a two year temporary exemption. The real estate tax is also based on the official Land Registry rental value."

How to choose your property ?

Define your goal : renting ?  to use it as a  dwelling? holidays home ?
Whatever the reason, you need to keep in mind the 3 basic rules of real estate :

1. the location, 
2. the location,
3. the location 

It is the most important because a real estate asset, takes time to be sold and each property on the real estate market is specific. 
Investing time in choosing the best property, guarantees that you  always will be able to rent it quickly, prevents the risk of having to move out prematurely (you or your tenant), also you will be able to sell it at the right price readily,

What do you find in the "compromis de vente" ?

The "compromis de vente" must contain the same information as in the official sale act.
Must be indicated :
- Details and identities of the vendor and buyer
- A full description of the property
- The area of the property (loi Carrez) and land.
- The purchase price, the breakdown of fees and who to pay each fee item.
- Details of the "notaire" and sales agent
- Details of any fixtures and fittings included in the sale
- Results of the legally required reports
- Details of mortgage financing and mortgage offer expected date.
- Any let out clauses (conditions/clauses suspensives) and the penalties that will be incurred by the buyer and/or seller if completion doesn't take place.

The selling process

In France, the selling process must follow a precise procedure. It might take longer than in your own country, but it aims to protect both sides at every moment:
1/ price offer
2/ negociation and agreement on price and condition
3/ signature of the « compromis de vente » with or without the "notaire". The various diagnoses must be annexed to the preliminary contract.
4/ cooling off period (legaly defined as 7 days)
5/ Delay for the satisfaction or fullfilment  of condition precedent (conditions suspensives).
6/ Signature with the notaire of the official legal document.