Capital gains tax on French real estate & proposed legislation by Macron Government

CAPITAL GAINS TAX ON FRENCH REAL ESTATE: proposed legislation by Macron Government leads to an increase of social security tax rate with 1.7% and should increase overall capital gains tax burden on the sale of French property.

President Emmanuel Macron does not, at least for the moment, express any explicit wish to modify the capital gains tax regime for the sale of French property (secondary residence other than main residence of the tax payer).

Under the current legislation the amount of French capital gains tax depends mainly on the number of years of ownership and the works done to the property. Under the condition that they qualify works increase the fiscal acquisition value of the property and decrease the gross taxable capital gain.

The gross capital gain is reduced with a percentage depending on the years of ownership and only available after the 5th year of ownership. For income tax and the additional tax a total exemption is available after 22 years and for social contributions (only) after 30 years of ownership.

The net capital gain is subject to personal tax in France at a fixed 19% income tax rate plus 15.5% social contributions, i.e. in total 34.5%. An additional taxation applies for any capital gain derived from the sale of a property that exceeds € 50.000. The tax rates vary from 2% to a top rate of 6%. In total the net capital gain on real estate can, under the current legislation (tax year 2017), be subject to a 40.5% overall tax burden.

President Macron is going to increase as from the tax year 2018 the level of social contributions on pension income, investment income and capital gains. He proposes to increase the rate of the so-called Contribution Sociale Généralisée by 1.7 percentage points. The CSG is one of five social contributions. As a consequence of this future change in legislation the rate of the social contributions will increase from 15.5% to 17.2%. In total the net capital gain on French real estate can, under the future legislation (tax year), become subject to a 42.2% overall tax burden.