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Capital Gains tax

Posted by mrbluesky-229427 - Created: 7 years ago
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10 replies (Showing replies: 1 to 10)

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Posted by quiet apartment, near Monte Carlo - 7 years ago

If you are selling to move to a rented apartment, i.e. unlocking equity, then you will still remain resident in France. The reason could be to unlock equity, just as "viagers" do, though viagers stay in their home.

There are many owners of second homes who rent them out, and if it is a "bail de trois ans", then the taxe d'habitation and utility bills will be in the name of the tenant. But if you are resident in France, you cannot have a tenant in the property which will be your main residence. Therefore when the "bail de trois ans" expires, the owner must live there and be resident. Therefore all the bills will be put in the name of the owner anyway. And if the owner is living there, because retired, then the owner is resident in France. All the advice I have received all along fits for these specific circumstances.

I am not writing about billionaires like Phillip Green who is non-resident in France, and  who is also working in the UK, so cannot possibly be resident in France.  The advice is for retired people who ARE RESIDENT IN FRANCE, and who may have another property in the UK.  No French tax rules are broken. The UK property would then become the "residence secondaire".

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Posted by laughingboy-409220 - 7 years ago

I don't see the logic behind this insistence on 'make sure the utilities bills etc are in your name' - the ultilies bills for every property are sent to the owner, aren't they, regardless of whether it is a maison sec or a res princ? So how will that cut any ice?

What it boils down to is, if the owner is resident here he will be able to prove it quite easily, and if he says he is when he isn't the authorities will easily find out. The only question that remains is, did he become resident solely in order to avoid tax, and that of course is a trickier one to answer.

Fortunately the OP has drawn the sensible conclusion from all this. Bon appetit, mrbluesky, enjoy your time in France.

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Posted by quiet apartment, near Monte Carlo - 7 years ago

The basis of the advice is that the vendor of the French property is retired and IS actually living in the French property before sale. If another property is owned in the UK, then rent it out as further proof that the French property is the main residence. The UK rental contract can be used as evidence if desired, and then statements showing credit cards used in France can be presented if the notaire should ask.

This is NOT tax evasion, just going by French rules, as Google, Ebay, Starbucks and Microsoft etc are doing in the UK.  Has nobody noticed that when you sell something on Ebay, the commissions they debit you "include 15% Luxemburg VAT"?

As regards paranoia. of course the higher tax had to apply to French owners of second homes, otherwise there would be a law suit in Brussels of discrimination against other EU nationals.


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Posted by mrbluesky-229427 - 7 years ago

Thanks for all responses- it has clarified the situation for me to some degree. I note the differing views on establishing primary residence in France. At the risk of appearing to be soft-headed, I favour the view that it is better to pay some tax than to become embroiled in interminable arguments with the French and UK tax authorities. I am at a time of life when the only arguments I want are those regarding the merits of different wines or different restaurants.

It will be interesting to see what the immobiliers say about the state of the French second home market

Cheers all

Mr B

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Posted by Golfer1-246910 - 7 years ago

Some clarification here for the totally paranoid out there.

The newly added 5% tax applies to ALL secondary residences and rental properties, it is not solely for non residents.

The justification for the increase tax is to subsidize investment in HLM housing, a noble cause in a left leaning country which France is.  It is highly inappropriate to call it non resident bashing.

Monte Carlo's suggestion on how to circumvent the tax is indeed tantamont to tax evasion, any half decent tax functionaire would see through it with their eyes closed.  The first thing they would do is to ask for a copy of your credit card transactions to determine your presence/location over the said time to determine whether France is actually the centre of your economic life (another little valid test of residency).  Before you know it you would have dug yourselve into such a hole that you would be begging to pay the bloody tax and penalties and be done with it. 

Follow the advice at your peril.



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Posted by quiet apartment, near Monte Carlo - 7 years ago


Yesterday, 11 Dec 2012  the French government added an extra 5% capital gains tax to non-residents if the capital gain on sale is above 150,000 Euros.

After the financial crisis in 2008, there was a columnist, Merryn Somerset Webb who did indeed presage that bankrupt governments such as Spain would take it out on non-residents, because non-residents are usually foreigners and can't vote.

What a contrast with the UK, where foreigners can buy via a limited co., which can be set up online for at most £100, and pay NO tax on purchase at all. Then they can sell without any capital gains tax up to a reasonable limit. In the UK, the locals are discriminated against and foreigners are given preferential treatment. Yet foreigners don't have the vote.

What should you do when you want to sell your French property?

Make sure you are paying taxe d'habitation, i.e. no tenant is there paying it, and make sure the utilities bills especially telephone are in your name. Also complete the income tax form in France that you are resident in France for tax purposes.  Provided you are retired and have a modest income, this should not impose burdens. Then after 8 months put the property up for sale as your "residence principale".

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Posted by appletrees-321263 - 7 years ago

Er - only 37.5% or 35% CGT on sale of your second home in France? I have read this is for UK and European residents and if you live elsewhere mostly - such as Middle East - you would pay about 62% CGT now. 

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Posted by laughingboy-409220 - 7 years ago

(that last post was me again by the way - just realised my guest have been playing on my pc while I was out!)

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Posted by earwig-0 - 7 years ago

No problem with that. As long as the person (together with their partner if they have one - the principal residence is defined the habitual family home) really does live here for 6 months and 1 day, they can certainly give it a try, It's just that, in your first post you said "declaring your French property as your principal residence 6 months before you sell it. You do not have to live there".

The person would need to bear in mind their claim that it is a residence principale is unlikely to be instantly accepted at face value. When a house is sold that has only very recently become a residence principale, the status is virtually certain to be investigated. So the more convincing the person makes it, the better, otherwise even if they really have lived there the authorities could still take the view that the person took up resdence for the sole purpose of avoiding CGT, and refuse the exoneration. French fonctionnaires have an annoying habit of taking no notice of what you tell them; instead they insist on reconstructing infinitely complex papertrails, and draw their conclusions from those. If it was simply a case of meeting one set of criteria, ticking a few boxes and counting days as it tends to be in the UK, it would be easy, but the French government has been cleverer by not setting down firm rules, and reserving the right to look at each case individually. They know the tricks that people are going to try, and they're looking out for them.

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Posted by quiet apartment, near Monte Carlo - 7 years ago

If someone is retired, they can live in their French residence before selling it. No rules are broken. Also they can get the forms from the tax authorities to declare that they are resident in France for tax purposes, and submit their income to be taxed. Then no rules are broken here too.

I'm talking about people living on a pension.

Obviously this does not work for the likes of billionaires like Phillip Green. But someone like him would have advisers telling him to stick to Monaco and make sure he does not have any assets in France at all.