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Capital gain tax calculation for individuals

The capital gain is the difference between the selling price and the purchase price.     (art.150 V French Tax Code).

Art. 150 V of French Tax Code

Selling price

RFPI – Capital gain – Determination of gross capital gain – Sale price

  • This is the price stated in the notary act.
  • Capital charges as well as any compensation paid to the seller (art. 150 VA-II french tax code) (such as compensation for eviction paid by the buyer on behalf of the seller), are added to this price.

Art. 150 VA-II of French Tax Code
  • The following costs, based on written proof, are deductible from this selling price :

Art. 150 VA-III of French Tax Code
Art. 41 duovicies H
  • the VAT paid by the seller at the time of the sale,

  • the value of furniture sold with the property (cf § "furniture"),

  • the costs paid by the seller (restrictive list) :
    • Fees paid to an intermediary (estate agent),
    • Fees paid to an accredited representative,
    • Fees related to mandatory certification (asbestos, parasites...),
    • Eviction compensation,
    • Fees paid to an architect to obtain a permit,
    • Fees paid to obtain release of mortgage.

These expenses must have been incurred by the seller and justified by showing invoices.


Acquisition price

RFPI - Capital gain - Determination of gross capital gain - Determining purchase priceRFPI - Capital gain - Determination of gross capital gain - Purchase price
This is the price stated in the purchase act, or the value stated in the act of donation or in the french deed of inheritance.

All capital charges as well as any compensation paid to the seller are added to the price.

Acquisition expenses can be added to the purchase price :


Paid acquisition : at actual cost or at 7,5% of acquisition price

  • Expenses related to the acquisition of the property are deductible at their actual cost : Notary'fees, agency's fees paid by the purchaser, legal fees, VAT paid by the purchaser…
    Warning ! The seller has to produce the invoices relative to those fees.

  • Or a 7,5% flat rate for costs can be applied*, either if it is higher than the actual paid costs, or if you have no proof. *(except in some special cases, notably when the seller had paid the purchase costs and notary fees : deed called "contrat/acte en mains")


Free acquisition (death, donation)

Declaration and deed costs (donation, inheritance, death certificate...), notary and other legal fees.
Lump sum of 7,5 % is excluded.


The cost of the work done on the property can be added

  • Either for their real cost, by producing all the invoices with legal mentions (art. 289 French Tax Code) and proof of payment (bank statements).

    Expenses related to construction, reconstruction, improvment or extension work are deductible.

    Warning :
    Neither maintenance, repair, and renovation work can never be deducted from the capital gain calculation, nor expenses which have already been deducted from income tax purposes.

    Costs of paid labour and materials are also excluded except if you had bought land and if you had built a building.
     
  • Or a 15% lump sum of the purchase price : if the built property is sold 5 years after its purchase. (this lump sum does not apply to land).


Capital gain calculation


- For the sale made between September 1st, 2013 and August 31st, 2014 :


 the allowance for holding period provided for in Article 150 of the CGI VC differ depending on whether the goods sold are or not building Land.

  • Building Land

The allowance for holding period are the same as those applicable for sales from 1st February 2012 to 31st August 2013, for the determination of the tax base of real estate capital gains relating to such property as to the income tax as social security contributions.
In this regard, it is the Land for the purposes of VAT on real estate transactions, as defined in 1 of 2 I of Article 257 of the CGI.

  • Other Properties

The rate are differents for the determination of the the tax base of real estate gains in income tax and social security contributions.

* Thus, for determining the taxable amount in income tax real estate gains, the deduction for holding period is:

  • 6% for each year of ownership beyond the fifth until the twenty-first;
  • 4% at the end of the twenty-second year of ownership.

In total, the income tax exemption is granted beyond a period of detention of twenty-two years.

* To determine the taxable amount of social security contributions to real estate capital gains, deduction for the holding period is:

  • 1.65% for each year of ownership beyond the fifth until the twenty-first;
  • 1.60% for the twenty-second year of detention;
  • 9% for each year beyond the twenty-second.

A total exemption from social security contributions is acquired beyond a holding period of thirty years.

Allowances applying to sales
of building lands
 
Length of detention
(years)
Allowances
Less than 6 years 0%
Between 6 and 7 years 2%
Between 7 and 8 years 4%
Between 8 and 9 years 6%
Between 9 and 10 years 8%
Between 10 and 11 years 10%
Between 11 and 12 years 12%
Between 12 and 13 years 14%
Between 13 and 14 years 16%
Between 14 and 15 years 18%
Between 15 and 16 years 20%
Between 16 and 17 years 22%
Between 17 and 18 years 24%
Between 18 and 19 years 28%
Between 19 and 20 years 32%
Between 20 and 21 years 36%
Between 21 and 22 years 40%
Between 22 and 23 years 44%
Between 23 and 24 years 48%
Between 24 and 25 years 52%
Between 25 and 26 years 60%
Between 26 and 27 years 68%
Between 27 and 28 years 76%
Between 28 and 29 years 84%
Between 29 and 30 years 92%
More than 30 years 100%
 
Allowances applying to sales
completed as september 1st, 2013 and before august 31st, 2014
(except building lands)
Length of detention
(years)
Allowances
(income tax)
Allowances
(social contributions)
Less than 6 years 0% 0%
Between 6 and 7 years 6% 1,65%
Between 7 and 8 years 12% 3,30%
Between 8 and 9 years 18% 4,95%
Between 9 and 10 years 24% 6,60%
Between 10 and 11 years 30% 8,25%
Between 11 and 12 years 36% 9,90%
Between 12 and 13 years 42% 11,55%
Between 13 and 14 years 48% 13,20%
Between 14 and 15 years 54% 14,85%
Between 15 and 16 years 60% 16,50%
Between 16 and 17 years 66% 18,15%
Between 17 and 18 years 72% 19,80%
Between 18 and 19 years 78% 21,45%
Between 19 and 20 years 84% 23,10%
Between 20 and 21 years 90% 24,75%
Between 21 and 22 years 96% 26,40%
Between 22 and 23 years 100% 28,00%
Between 23 and 24 years - 37,00%
Between 24 and 25 years - 46,00%
Between 25 and 26 years - 55,00%
Between 26 and 27 years - 64,00%
Between 27 and 28 years - 73,00%
Between 28 and 29 years - 82,00%
Between 29 and 30 years - 91,00%
More than 30 years - 100,00%


WARNING : Exceptional Allowance of 25% on capital gains for sale between September 1st, 2013 and August 31st, 2014

For capital gains other than land for building or rights thereto, occurring from 1st September 2013 to 31st August 2014, a special allowance of 25% is applicable to the determination of net taxable after the reduction in length of detention.

It does not apply to transfers made by the seller in favor of :
  • Spouse, partner under a civil solidarity pact, his cohabitant, an ascendant or descendant of the seller or one or more of those persons;
  • A legal entity which the seller's spouse, partner under a civil solidarity pact, his cohabitant, parent or child of one or more of these persons is a partner or becomes the during this assignment.

The special allowance of 25% is calculated on the net taxable base real estate capital gains. It therefore applies especially after taking into account the deduction for holding period in respect of disposals made on or after 1 September 2013.

The reduction of 25% is applicable for the determination of the tax base as the income tax as social contributions of real estate gains.

It also applies in the same conditions for the determination of the tax base on capital gains high estate under section 1609 nonies G CGI (additional tax).


- For the sale completed as September 1st, 2014 :


1. It is no longer made ​​any distinction depending on the type of the properties sold (building land and rights therein or other property and property rights) for the determination of the tax base real estate capital gains. 


The rate are differents for the determination of the the tax base of real estate gains in income tax and social security contributions.

* Thus, for determining the taxable amount of income tax real estate capital gain, the allowance for holding period is :

  • 6% for each year of ownership beyond the fifth until the twenty-first,
  • 4% at the end of the twenty-second year of ownership.

In total, the income tax exemption is gained beyond a period of detention of twenty-two years.

* To determine the taxable amount of social security contributions real estate capital gain, the allowance for holding period is:

  • 1.65% for each year of ownership beyond the fifth until the twenty-first,
  • 1.60% for the twenty-second year of detention,
  • 9% for each year beyond the twenty-second.

A total exemption from social security contributions is gained beyond a holding period of thirty years.


Allowances applying to sales
completed as september 1st, 2014

 
Length of detention
(years)
Allowances
(income tax)
Allowances
(social contributions)
1 à 5 ans 0% 0%
6 6% 1,65%
7 12% 3,30%
8 18% 4,95%
9 24% 6,60%
10 30% 8,25%
11 36% 9,90%
12 42% 11,55%
13 48% 13,20%
14 54% 14,85%
15 60% 16,50%
16 66% 18,15%
17 72% 19,80%
18 78% 21,45%
19 84% 23,10%
20 90% 24,75%
21 96% 26,40%
22 100% 28,00%
23 - 37,00%
24 - 46,00%
25 - 55,00%
26 - 64,00%
27 - 73,00%
28 - 82,00%
29 - 91,00%
30 - 100,00%


Article 150 VC du CGI

 


2. Extension of the reduction of 25%
 
Capital gains realized under the sale of property or rights to such property other than building land, received until August 31st, 2014, after application of the allowance for holding period, of an exceptional reduction of 25%.
(base BOFIP - BOI-RFPI-PVI-20-20-20140109, No. 270, legalized by the Finance Act 2014 (Art.27)).

 

The legislature extended under certain conditions this reduction of 25% :

? firstly to capital gains realized on the disposal relating to immovable property situated in the municipalities belonging to a continuous urban area of more than 50,000 inhabitants, as defined in Article 232 of the CGI, intervening between 1st September and 31st December 2014 and,
? secondly to capital gains under the same sale takes between 1st January 2015 and 31st December 2016 on condition that a sales agreement has acquired certain date no later than 31st December 2014.


In both situations the assignee must engage in the deed of purchase, demolish existing buildings to achieve and complete premises for residential floor area which is at least equal to 90% of "the maximum floor area permitted under the rules of the local plan or land use plan" within four years from the date of acquisition.


 
3. Exceptional allowance of 30 % on capital gains resulting from sale of building lands preceded by a preliminary contract signed between 1st September 2014 and 31st December 2015.

It concerns the building land within the meaning of VAT on property transactions (Article 257 of the French Tax Code).
 
It applies to capital gains arising on sale of building land made by individuals or companies or groups covered by Article 8, 8a and 8b of the French Tax Code, and by individuals non-domiciled for tax purposes in France.
 
It does not apply to transfers made by the seller in favor of :
- Spouse, partner under a civil solidarity pact, his cohabitant, an ascendant or descendant of the seller or one or more of those persons,
- A legal entity in which the seller's spouse, partner under a civil solidarity pact, his cohabitant, parent or child of one or more of these persons is a partner or becomes during this assignment.
 
The exceptional 30% reduction applies to the dual conditions that the sale :
- Be preceded by an agreement to sell signed between 1st September 2014 and 31st December 2015,
- Be completed no later than December 31st of the second year following the year in which the agreement to sell acquired certain date (and a closing before 31/12/2017).
 
The reduction of 30% is applicable for the determination of the tax base as the income tax as social contributions of real estate gains
The special allowance of 30% is calculated on the net taxable base real estate capital gains. It therefore applies especially after taking into account the deduction for holding period.

Finance Act 2015: Extension of the 30% reduction in the built buildings
 
Enlargement of the 30% reduction to land supporting built buildings for demolition for the construction of new housing.
 
Thus, the 30% reduction will be applicable to preliminary demolition operations in the reconstruction of a residential area, in the areas of urbanization over 50 000 defined in Article 232 of the CGI.
 
The list of common purpose has been defined by the decree of May 10, 2013, No. 2013-392.
 
This is only applicable for preliminary contracts signed from 1st January 2015 to December 31st, 2015 and a closing before 31/12/2017

This will also apply, as appropriate, to determine the rate of the tax on capital gains high estate provided for Article 1609 nonies G CGI. 

Cumulative allowances of 25% and 30% is not possible


Tax Rate

Until 31st December 2014, the tax rate varied according to the place of residence of the seller :

  • 19% if you are fiscal resident in an EU Member country (more social charges),
  • 19% if you are fiscal resident in France (more social charges),
  • 33,1/3% if you are fiscal resident out of EU (more social charges),
  • 75% if you are fiscal resident in an ETNC (more social charges) (No-cooperative countries and territories)

As from 1st January 2015: single tax rate of 19% for all individuals regardless of place of residence.

Morever you will have to pay french social charges (7,5% or 17,2% : contact us to check the rate with you)