The basic principal is that property in France will always be potentially subject to French capital gains tax, irrespective of your place of residence. As in the UK, however, your “principal residence” is exempt from capital gains tax.

One of the most frequent misunderstandings and therefore largest problems is caused by the fact that you can only call your “home” your principal residence if you are formally tax resident in France. Many clients are surprised to be charged capital gains tax, since they have been living in the property for some time, but they have never entered the French tax system, nor completed a tax return. Beware!

At least one of the most positive changes in the legislation this year improves the chance that your previous “holiday home” can be called your principal residence. Previously, if you owned a property as a holiday home and then moved into it, you had to live in it for 5 years before calling it your “principal residence” for tax purposes. This delay has now been removed. In practice, however, you should still be able to show that you have completed a tax return, while resident at that address and the Notaire who is responsible for your sale and therefore collecting the tax, may ask to see two years’ returns.

The basic rules for the calculation of the tax are that the purchase price can be revalued, by purchase and sale costs plus any major renovation bills, although there is now no inflation allowance. The resulting figure is subtracted from the sale price to calculate the taxable gain.

The gain is then taxable at a set rate of 16%, for European residents, with an a extra “social tax” ( a form of National Insurance contribution) of 10% ( rising to 11% this year) for French residents. Anyone who is not a resident of a European state will pay a set tax rate of 33%.

However, as you may expect, the conditions of acceptance of “renovation work” are very stringent. This must be carried out by a registered French artisan (with appropriately made out invoice) and invoices for materials you have purchased yourselves are not permissible. This is a major change and can be a nasty surprise for those who have undertaken work themselves based on their understanding of the old CGT rules.

Furthermore, if you are non-resident of France, you may be obliged to appoint an official “fiscal representative”, to be responsible for calculating and paying the tax on your behalf. This may be quite expensive.

There has always been a significant allowance given for the length of time you have owned a property, which has also seen major changes this year:
There is no allowance for the first 5 years of ownership, but every year, from then on, allows you 10% off your capital gain, with the result that a property owned for more than 15 years is free of Capital Gains Tax.