Since 1 January 2023, if the amount of the property gain taxable for income tax (« impôt sur le revenu ») purposes exceeds 50,000 EUR, the seller must pay a surcharge ranging from 2% to 6% depending on the amount of the property gain. 

Below is a fee schedule contained under the French Tax Code (« Code Général des Impôts ») :

The tax on certain real estate property is due when the net taxable gain (« plus-value nette imposable ») exceeds 50,000 EUR. 

In this case, if the amount of the property gain exceeds 50,000 EUR, the amount of the tax is applied according to the formula set out in the table above. 

The acronym «PG » refers to the amount of the property gain (« le montant de la plus-value imposable »).

For example, if the amount of your property gain exceeds 50,000 EUR and you want to calculate the amount of tax that you will have to pay in accordance with the amount of the property gain : 

2% of 50,000 EUR – [(60,000 EUR – 50,000 EUR) X 1/20] 

= 1.000 EUR – ([10,000 EUR ) X 0.05]

= 1.000 EUR – 500 EUR

= 500 EUR

Then, if the amount of your property gain exceeds 50,000 EUR, the amount of the tax will be 500 EUR. 

However, the capital gain realized on the sale of the main residence is not taxable.

It must be your usual and effective principal residence (« résidence principale »).

For example, the one you occupy for most of the year. 

Thus, the temporary use of a property, particularly just before its sale, will not allow you to benefit from the exemption.

It must also be your principal residence (« résidence principale ») on the day of the sale. 

However, if you have already left the property on the day of the sale, you can still benefit from the exemption provided that you have occupied it until the day it is put up for sale and that the sale takes place within a normal period of time (in principle one year).

In addition, there are grounds for exemption. Capital gains on real estate are exempt if : 

— The property has been owned for more than 22 years ; 

— The property sold is the seller’s principal residence on the day of the sale ; 

— The seller is a non-resident ; 

— The sale price is reused by the seller to buy or build a home used as a principal residence (« résidence principale ») within 24 months. The seller must not have been the owner of his or her main residence during the four years preceding the sale ;

— The property sold is a right of elevation. The capital gain is exempt provided that the buyer has finished the premises intended for habitation before 31 December 2022. 

The property gain realized on the sale of a second home is subject to income tax (« impôt sur le revenu ») at a rate of 19% and social security contributions (« charges sociales ») at a rate of 17.2%.

The tax rate on property gains from the sale of second homes is therefore 36.2%.

Example : 

Mr. Jean is going to sell his rental property.

It is not his main residence. He bought it for 150,000 EUR and is selling it for 300,000 EUR. 

He has owned it for 11 years and 9 months. 

The notary fees were 4,000 EUR and all the work done was deductible from the rent. 

He has done of 3,000 EUR for various diagnostics.

What will he pay on the capital gain ?

1: Calculation of the gross property gain (« capital immobilier brut » : 

Mr. Jean can increase his purchase price by 7.5% or by the notary fees paid. 

The 7.5% option is better because Mr. Jean can also include the works. 

As he is not allowed to include those deducted from taxes, he will use the 15% lump sum (« montant forfaitaire ») which is possible as he has owned the property for more than 5 years. 

He can also deduct the expenses incurred by selling the property.

2- Calculation of the taxable capital gain : Allowance for length of ownership : 

The tax authorities take into account 11 years of ownership.

The deduction for holding time is 6% per year from the sixth year for income tax purposes. 

This gives 6% X 6 years = 36% allowance.

The taxable property gain for income tax is : 

113.250 EUR – (113.250 EUR * 36%) 

= 113.250 EUR – (113.250 EUR X 0,36) 

= 113.250 EUR – 40.770 EUR

= 72.480 EUR.

The deduction for the length of ownership is not the same for social security contributions (« cotisations sociales »).

It is 1.65% per year for 6 years (for example, 9.9%).

The capital gain taxable for social security contributions (« cotisations sociales ») is : 

113.250 EUR – (11.250 EUR X 9.9%) 

= 113.250 EUR – (11.250 EUR X 0.099)

= 113.250 EUR – 11.137,5 EUR

= 102.112,5 EUR.

3- Calculation of tax and social security contributions (« cotisations sociales ») : 

Income tax is 19% and is applied to the taxable property gain of 72.480 EUR. 

You have to pay : 72.480 EUR X 19%

= 72.480 EUR X 0.19

 = 13.771,2 EUR.

Social security contributions (« cotisations sociales ») are 17.2% to be paid on the other taxable base of 102.112,5 EUR. 

You must also pay : 17.2% X 102.112,5 EUR

= 0.172 × 102.112,5 EUR

= 17,563.35 EUR.

4- Additional tax for real estate property gains : 

Here, the property gain taxable for income tax is 72.480 EUR.

This is above the 5,000 EUR threshold (« abattement »).

According to the fee schedule, if the capital gain is between 60,000 EUR and 100,000 EUR : 2% X the amount of property gain must be paid. 

This gives 72.480 X 2%

= 72.480 × 0.02

 = 1.449,6 EUR

Mr Jean will pay a total of 13.771,2 EUR + 17,563.35 EUR + 1.449,6 EUR 

= 32,784.15 EUR.

It should be noted, however, that the property gain realized on the sale of a secondary residence (« résidence secondaire ») is exempt provided that the seller :

— Has not owned his or her main residence during the 4 years preceding the sale ; 

— Has used the proceeds of the sale to acquire or build his or her principal residence (« résidence principale ») within 4 years of the sale.

If the seller has only reused part of the sale price of his property, the exemption is proportional to the fraction that he has reinvested.

When calculating the property gain, an allowance for the length of time the property has been held is applied.

Its calculation methods differ according to the property gain taxable under income tax (« impôt sur le revenu ») (19%) or social security contributions (« cotisations sociales ») (17.2% as of 1 January 2018).

For income tax (« impôt sur le revenu ») purposes, the allowance is :

— 6% for each year of ownership after the 5th and up to the 21st years ;

— 4% for the 22 year of ownership ;

The total exemption of property gains on real estate for income tax (« impôt sur le revenu ») purposes is thus acquired at the end of a twenty-two-year holding period.

Review of the finding of enforceability of a foreign decision

The Regulation determines jurisdiction, recognition and enforcement of judgments in civil and commercial matters within the Member States of the European Union (EU).
The regulations determine the jurisdiction of the courts in civil and commercial matters. It stipulates that decisions rendered in a Member State of the European Union (EU) are recognized in the other Member States, without the need to resort to any procedure except in the event of a dispute. A declaration relating to the enforceability of a decision must be issued after a simple formal check of the documents provided, without the court being able to automatically raise one of the grounds for non-execution provided for by the regulation.

The regulations do not cover tax, customs or administrative matters or the following matters:

– the status and capacity of natural persons, matrimonial regimes, wills, successions;
– bankruptcies;
– social Security;
– arbitration.

Summary :

I – COUNCIL REGULATION (EC) N°44/2001 OF 22 DECEMBER 2000 ON JURISDICTION, RECOGNITION AND ENFORCEMENT OF JUDGMENTS IN CIVIL AND COMMERCIAL MATTERS

II – THE JUDGMENT OF APRIL 12, 2012 OF THE FIRST CIVIL CHAMBER OF THE COURT OF CASSATION

III – DIFFICULTIES IN ENFORCING FOREIGN DECISIONS CONCERNING COLLECTIVE PROCEEDINGS

file to download:

The real estate capital gain realized on the occasion of a real estate sale is taxable on income (IR) and social security contributions.

However, many exemptions exist.

How is a real estate capital gain calculated?

The capital gain is taxable when it comes from a transfer for consideration: sale of real estate or the rights attached, exchange, contribution to a company, etc.

It is calculated in two steps:

• the calculation of the gross capital gain (1), and
• the application of allowances (2).
• The calculation of the gross capital gain

The gross capital gain is the difference between the sale price and the acquisition price.

The sale price is the price mentioned in the deed of sale plus the charges and indemnities paid by the buyer (for example, an eviction indemnity) and reduced on receipt of the costs borne by the buyer. seller (for example, the cost of real estate diagnostics or mortgage discharge costs).

As for the acquisition price, it corresponds to the purchase price or the value that appears in the declaration of inheritance or in the deed of gift.

It is increased:

• acquisition costs (notary fees, registration fees, etc.) of a lump sum of 7.5% of the purchase price or actual costs on receipts; and
• work for a lump sum of 15% of the purchase price for a property held for more than five years or at actual costs on receipts.

Example: for a purchase price of €200,000, fixed valuations allow the price to be increased by €15,000 for acquisition costs and €30,000 for works.

• The application of allowances

To this capital gain apply deductions for duration of detention.

For example, for a property held for 15 years, the seller benefits from a reduction of:

• 60% for IR,
• 5% for social contributions.

For a capital gain of €40,000, only €16,000 will be subject to income tax and €33,400 to social security contributions.

Note

For properties located in certain “tense” areas between supply and demand, an additional 70% reduction is applicable if the transfer allows the construction of collective residential buildings and 85% if it is mainly social and/or intermediate housing.

In practice, this exceptional allowance applies to transfers carried out until December 31, 2022 (provided that the preliminary contract has acquired a certain date between January 1, 2018 and December 31, 2020).

The tax rate of the capital gain: after deduction, the capital gain is taxed on income tax at the rate of 19% and on social security contributions at the rate of 17.2%.

An additional tax is due for capital gains over €50,000, after the allowance.

It is 2% to 6% depending on the amount of the capital gain.

What are the exemptions?

There are many exemptions concerning real estate capital gains, each subject to specific conditions.

Thus, sales of main residences, those whose price is less than €15,000 or sales for the benefit of bodies responsible for social housing.

The capital gain is also exempt when the seller does not own his main residence and uses the money from the sale price to acquire one or when a non-resident sells a dwelling located in France.

In addition, retirees and people who live in social, medico-social establishments, care for the elderly or disabled adults can benefit from an exemption subject to income conditions.

Cabinet Nicolas BRAHIN

Advokatfirma i NICE, Lawyers in NICE

contact@brahin-avocats.com

1, Rue Louis Gassin – 06300 NICE (FRANCE)

Phone : +33 493 830 876 / Fax : +33 493 181 437

www.brahin-avocats.com

To open a bank account in the United Kingdom, certain documents must be provided to the bank concerned, while others may be requested.

• Documents to be provided:
• A valid identity document: identity card, passport, driving license… ;
• Proof of address: EDF bill, telephone bill, rental contract, etc.; and
• Proof of income: pay slips, bank statements, tax form…
• Documents that may be required (especially for non-UK citizens):
• An employment contract or letter from the employer.
• A letter from the university.

It should be noted that the British bank can check the credit history of new customers.

Lawfirm Cabinet BRAHIN

Nicolas BRAHINI Avocat

Master’s Degree in Banking and Financial Law

nicolas.brahin@brahin-avocats.com

1, Rue Louis Gassin 06300 NICE (FRANCE)

Tel : +33 493 830 876 / Fax : +33 493 181 437

www.brahin-avocats.com

The new measures apply to sales of real estate excluding building land for which the calculation in force continues to apply. Currently, you must have owned land for at least 30 years to be fully exempt from capital gains tax. This will still be the case for sales until December 31, 2013.

According to the government, this should encourage landowners to put them up for sale rather than keeping them to reduce the amount of tax as is currently the case.

As of September 1, 2013, for other assets subject to capital gains tax, the exemption will be total after 22 years of ownership compared to 30 years currently. But beware, this exemption concerns the share of income tax due on the capital gain, but does not concern social security contributions! It should be remembered that the total amount of capital gains tax, which currently stands at 34.5%, is made up of both:

• 19% tax on income tax;
• 15.5% social levies (CSG, CRDS and social levy).

In conclusion, after 22 years, sales will escape the 19% income tax, but will remain subject to social security contributions. Only sales of goods owned for at least thirty years will fully escape any taxation.

During the first 5 years of detention, nothing changes, there is still no reduction by duration of detention, as is currently the case.
But as of September 1, 2013, for property other than building land, the rate of the allowance will be tripled from the 6th year of ownership as follows: it goes from 2% to 6% from the 6th year , and remains constant for 16 years, which allows a total reduction of 96% after 21 years of ownership of the property.
Then, with a 4% reduction for the 22nd year of detention, this therefore allows 100% reduction after 22 years of detention.

On the amount of taxable capital gain generated, an exceptional allowance will apply to sales of homes that will take place between September 1, 2013 and August 31, 2014. It is calculated after taking into account the allowance by duration of holding, and applies to both income tax and social security contributions. Once the taxable capital gain has been determined according to the new calculation, a 25% allowance will therefore apply.

This new tax system is therefore clearly more favorable for those who sell a home.
Example :
For a single resident or a married couple under a community regime.
Acquisition on February 1, 2003 for €190,000.
Resale on September 3, 2013 for €420,000.

The sale occurring after 10 full years of ownership, the calculation is made as follows:

• Acquisition price of €190,000 to which are added 14,250 euros of “notary fees” (7.5% of the purchase price by default) and 28,500 euros for work (15% of the purchase price by default), i.e. €232,750
• The taxable capital gain is therefore €420,000 – €232,750 = €187,250

The situation until September 1, 2013:

To which we add the amount of the additional tax for real estate capital gains of more than 50,000 euros in the amount of 6,741 €, i.e. a total tax of 64,882 €.

The transitional situation from September 1, 2013 to August 31, 2014:

To which we add the amount of the additional tax for real estate capital gains of more than 50,000 euros in the amount of 1,966 €, i.e. a total tax of an amount of 40,616 €.

The situation as of September 1, 2014:

To which we add the amount of the additional tax for real estate capital gains of more than 50,000 euros in the amount of €3,595, i.e. a total tax of an amount of €52,515.

file to download:
130924 new capital gains measures (example)

The territoriality of income tax

Persons whose tax domicile is located in France are liable to French income tax due to all of their income from all sources. It is therefore an “unlimited” tax obligation, whatever his nationality, the taxpayer must, in principle, be subject to tax in France on all his income from French or foreign sources. This principle may, however, include derogations resulting from international conventions relating to double taxation.

A person is considered to have his disc domicile in France when :

1. She has her home in France.
The home means the place where the person or his family normally lives, that is to say the place of habitual residence, without taking into account temporary stays elsewhere due to professional needs or circumstances. exceptional. Ex: can be considered as domiciled in France for tax purposes, a person exercising his activity abroad, if his family lives in France.

2. She has her main place of residence in France.
It is enough for a person to have stayed in France for more than 183 days during the same year for them to be deemed to have had their main stay in France for that year.

3. She pursues a professional activity in France.
4. It has the center of its economic interests in France.

This is the place where the person concerned has made his main investments, where he has his seat of business, from where he administers his property.

Summary :

A/ THE DEFINITION OF TAX DOMICILE.

B/ THE IMPACT OF INTERNATIONAL CONVENTIONS.

C/ PERSONS WHO DO NOT HAVE THEIR TAX DOMICILE IN FRANCE.

File to download :
101115 – La territorialité de l’IR