Taxe sur la Plus-Value (Capital Gains Tax)

Capital gains tax is charged in France on gains which accrue in respect of "one off" at "arm's length" transactions carried out otherwise than in the course of business. Hence, for example, benefits made by purchasing and re-selling land in the course of business are chargeable to income tax or corporation tax, depending upon whether the vendor is a private individual or a company not to capital gains tax. Furthermore, capital gains tax is chargeable neither on inter vivos gifts (gifts made in the lifetime of the donor) or dispositions made by will, both types of gifts attracting inheritance tax only. In truth there is an element of capital gain tax concealed in the inheritance tax, as the value to be charged to inheritance tax reflects the value of the gift at the time of its grant and not at the time when it was first acquired by the donor or testator.

When it comes to taxing capital gain on the sale of residential property, French revenue law, exempts such property from capital gain tax inasmuch as such sale relates to the principal private residence of the disposer and that it is effectively occupied by him at the time. This exemption applies to British nationals, who are residents in France for income tax purposes, upon selling their principal residence there. Owners, selling a private residence that is not their principal home, are liable to pay capital gain tax on such sale, regardless of their nationality or residency status (save for some exceptions not covered here), subject to taper relief which effectively takes the sale out of charge to capital gain tax altogether, if the property has been retained in their ownership for 15 years or more.

The current rate of capital gain tax before taper relief is 16% where the gain accrues (inter alia) to:

• A resident selling a "secondary" home,
• A non-resident individual, and
• A resident "land" company owned by non-resident individuals.

This rate increases to 33% where the property is owned by a resident or non-resident company paying corporation tax in its country of incorporation. Such company incidentally, is not eligible for taper relief in France. As with most areas of law the issue of taxation is an area in which advice tailored to one's individual circumstances is preferable.