Real Estate capital gains : the French fiscality

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The system of real estate gains is constantly changing . In 2013, the government has amended  the modality of deduction, differentiated the deduction for the application of the tax rate of 19% with the one applicable to the social security contributions, and introduced a surcharge on gains exceeding €50,000. Here is the current regime.

Real Estate gains on principal residence

To begin with, it is important to remember that taxes on real estate gains only apply to second homes or on rental properties . In other words, the main residence and land totally escape taxation.

The principle of rebates on Real Estate gains

The law provides for an exemption through a gradual reduction evolving through years of detention. The modalities of application of this allowance change regularly to suit the political imagination.

To simplify things, the latest version of the tax law provides to differentiate the reduction on the tax rate of 19% from the one of the social security contributions of 15.5 % !

Specifically, the taxpayer will stop paying the 19% tax after 22 years, but will continue to pay part of the social security contributions up to 30 years.

The scales are:

Year of detention Deduction on 19% Tax Deduction on 15,5% Social Charges Tax rate excl. surcharge
0 0% 0,00% 34,50%
1 0% 0,00% 34,50%
2 0% 0,00% 34,50%
3 0% 0,00% 34,50%
4 0% 0,00% 34,50%
5 0% 0,00% 34,50%
6 6% 1,65% 33,10%
7 12% 3,30% 31,71%
8 18% 4,95% 30,31%
9 24% 6,60% 28,92%
10 30% 8,25% 27,52%
11 36% 9,90% 26,13%
12 42% 11,55% 24,73%
13 48% 13,20% 23,33%
14 54% 14,85% 21,94%
15 60% 16,50% 20,54%
16 66% 18,15% 19,15%
17 72% 19,80% 17,75%
18 78% 21,45% 16,36%
19 84% 23,10% 14,96%
20 90% 24,75% 13,56%
21 96% 26,40% 12,17%
22 100% 28,00% 11,16%
23 100% 37,00% 9,76%
24 100% 46,00% 8,37%
25 100% 55,00% 6,97%
26 100% 64,00% 5,58%
27 100% 73,00% 4,18%
28 100% 82,00% 2,79%
29 100% 91,00% 1,39%
30 100% 100,00% 0,00%

Presentation of the Real Estate surcharge

Since 1st January 2013 the tax applies on real estate capital gains on properties already built. The amount varies depending on the capital gain.

Amount of gain Amount of tax

Entre  50 000 et 100000 €

2 %

Entre  100 000 et 150 000 €

3 %

Entre  150 000 et 200 000 €

4 %

Entre  200 000 et 250 000 €

5 %

Plus de 250 000 €

6 %

The tax must be paid by the transferor at the time of sale. The government plans by this measure a tax gain of €130 million for 2013.

Impact of the surcharge for gains greater than €50,000

This new tax on real estate gains adds to the flat rate tax of 19% already in place and the current social security contributions of 15.5 %.

The overall effective rates of taxation of capital gains are therefore the following :

Amount of gain Amount of tax

Entre  50 000 et 100000 €

36.5 %

Entre  100 000 et 150 000 €

37.5 %

Entre  150 000 et 200 000 €

38.5 %

Entre  200 000 et 250 000 €

39.5 %

Plus de 250 000 €

40.5 %

The overall tax applies to the capital gain, reduced by the percentage of the deduction required by law depending on the holding period of the property.

In conclusion

The marginal rate of 40.5 % could be considered confiscatory by the owners. Unless in an emergency, no doubt some would postpone the sale of their property to play to the mechanism of deduction on real estate gains. For years it has become fashionable to take offence at the housing difficulties faced by the French. However , successive governments have repeatedly been taxing owners raising levies on real estate gains and sclerosing growth of that market. A situation somewhat paradoxical.

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