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Posted on 06/05/2022

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In this 1st quarter of 2022, luxury real estate continues to do perfectly well. The Atlantic coast, a reasonable distance from Paris, and the Bassin d'Arcachon in particular attract potential "urban" buyers who keep the successive confinements anchored in them. This urban “exodus” has boosted the main and secondary residence market there. If some are buying... it's because others are selling: what if we remind you of some basic rules regarding the taxation of real estate capital gains.

How to calculate the capital gain of a property? Is this capital gain the same for a French and foreign resident?

This article aims to shed some light. To calculate the exact amount of your capital gains tax, we advise you to contact a notary or a tax lawyer.

In France, this may concern approximately 57% of property owners, 57% of us !


What is a real estate appreciation ?

When reselling a property, if you sell your property for more than its purchase price: you realize what is called a capital gain. We are talking here about the real estate capital gains tax regime applicable to capital gains realized by individuals in the management of their private assets. (Article 150U of the CGI)

Do not be afraid !! there are a number of exemptions:

• Assignment of principal residence
• First sale of a dwelling other than the main residence (if you have not owned your main residence in the two previous years)
• Assignment made by elderly or disabled people of modest means
• Duration of ownership of the asset sold greater than 30 years
• Sale of a dwelling in France from non-residents
• Sale less than €15,000
• Nature of the operations carried out (expropriation, etc.)
• Some shares
• transfer to organizations in charge of social housing or private individuals undertaking to build social housing
• right of elevation.
• tense area

How to calculate a real estate capital gain ?

The sale price is that which is stipulated in the deed (minus the costs of transfer (limitedly listed by law) and the amount of VAT paid. The capital gain is obtained by subtracting from this sale price the price of purchase, which is increased by registration fees.
Clarification !! the acquisition price means:
1 - If the property was received by gift or inheritance, of the declared market value. It is increased by the remuneration of the notary and transfer duties free of charge if these have been borne by the donee or the heir.
2 - If the property has been purchased, the price noted in the notarial deed. Of course, the amount of the purchase can also be increased by maintenance and/or renovation expenses (on receipt - the work must have been done by companies): reconstruction, expansion, etc.

When selling a property acquired more than 5 years ago, it is possible to apply an increase of 15%, without the obligation to present invoices for the work (It is necessary to provide proof of this at the request of the administration ( CGI ann. II, art. do not have the character of "rental expenses" (CGI, art. 150 VBII, 4°).

Note: As mentioned above, acquisition costs include registration fees and notary fees. If they cannot be justified, DO NOT PANIC!!!, they will be a lump sum of 7.5% of the purchase price.
Note BIS: Maintenance and repair work cannot be taken into account in the calculation. Indeed, only the work which aims to maintain the building in good condition enter into the determination of the added value are taken into account.

Allowance for a holding period :

Once the amount of the capital gain has been fixed, an abatement can be applied. It will depend on how long the asset is held. The longer this period, the lower the amount of the taxable capital gain.

Since February 1, 2013, for income tax, the allowance for length of detention applies as follows: - 6% for each year of detention beyond the 5th and up to the 21st - 4% for the 22nd completed year of detention.
GOOD NEWS !!! the total exemption of the capital gain is therefore acquired after 22 years of ownership of the accommodation.


The net taxable capital gain for social security contributions :

With respect to social contributions, the allowance is established: - 1.65% per year of detention beyond the fifth and up to the twenty-first. - 1.60% for the twenty-second year of ownership. - 9% per year beyond the twenty-second.
GOOD NEWS AGAIN!!! total exemption from social security contributions is granted after a holding period of 30 years.

Is the calculation different if it is a main or secondary residence ?

The main residence is exempt from real estate capital gains.

HOWEVER: When selling your second home, it is possible to be exempt under certain conditions:
- This must be your first time
- you must not have owned your main residence during the 24 months preceding the sale.
- You must plan to reinvest the proceeds of the sale in the acquisition or construction of your next main residence within 2 years of the sale.
- In the case of joint ownership (or if the ownership of the property is dismembered),
- When the sale price is less than €15,000 for a single person and €30,000 for a couple


What about the tax for high real estate capital gains ? 

Since January 1, 2013, if the realized capital gain exceeds €50,000, an additional tax applies. This small additional tax, from 2 to 6% depending on the amount of the capital gain after application of the allowance, applies (except on building land).

What about taxpayers domiciled outside France ?

Before investing in France, we advise our foreign national friends to approach a professional who can detail to the foreign buyer: the cost, the various taxes and other costs. It will also detail the taxes that will have to be paid (depending on whether the property will be used as a main residence or will constitute a rental investment, for example). These choices will be important because they will generate special taxation, applicable during the detention of the property or during its subsequent resale (V.A.T., capital gain, intervention of an accredited representative, etc.). Here again, very different regimes exist ranging from exemption to heavy taxation.

We advise you to read this exhaustive article: (art. 244bis A du CGI).
This tax regime for real estate capital gains realized by non-residents has been completely rewritten by article 27 of law 2002-1822 of December 24, 2007. The objective of this overhaul is to extend the scope of application of the levy to bring it into line with European law.


To conclude on the real estate capital gain :

Buying real estate can be done in different ways: you can interpose or not a company (SCI for example), you can choose to pay cash or use a bank loan, you can decide to associate your children with the acquisition. or to postpone the transmission... IT'S UP TO YOU!!
The applicable taxation will depend on these choices... on your investment strategies. In a context of rising prices, real estate is the big winner of investments... so... go to our website and make your choice!! The stone is a real and useful asset (We live there, we work there, we receive family and friends there...).
Since the bulk of real estate capital gains are allocated to built-up land, the context may still be favorable for investing. Home loan rates are still low, even if they go up a bit; they make bank financing inexpensive.

So... action!!!

 

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