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Real estate capital gain: calculation and exemptions

Posted on October 11, 2022

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.

Holding period Reduction rate applicable each year of ownership for income tax Reduction rate applicable each year of detention for social contributions
Less than 6 months 0% 0%
From 6th to 21e year 6% 1.65%
22th year 4% 1.60%
Beyond the 22th year Exoneration 9%
Beyond the 30th year Exoneration Exoneration

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

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