Capital gains tax is often overlooked in favour of more immediate tax obligations, such as income, property and wealth tax. For international expatriates, overseas residents and investors, it may be an essential aspect of your long-term financial planning, depending on the location and nature of the assets you own.
In France, capital gains tax liabilities may apply to assets such as shares, real estate, dividends, and interest earnings as well as incomes and profits made on investment property sales. There are also considerations about the potential for tax levies to be raised against assets held in the UK if you become a tax resident or French permanent resident.
The expatriate wealth management specialists at Chase Buchanan share insights into the French capital gains tax system to clarify the value of accurately budgeting for forthcoming or future tax liabilities.
Understanding French Capital Gains Tax Against Investments and Equity Shareholdings
In 2018, the French government’s Budget Act introduced a streamlined and simpler tax system for both residents and non-residents. The system deals with the taxes arising against the sales of shares, equity assets, and other types of investment products.
The system applies the same tax rates to dividends and interest earnings without an additional social charge – making it easier to budget for the tax arising from the sale, transfer or disposal of investment assets.
Capital gains tax is payable as follows:
- Investment gains are taxed at a 30% flat rate for residents, split between a 12.8% tax charge and a 17.2% social contribution rolled into one rate. This rate applies to capital gains linked to the sale of securities, interest earnings and dividends.
- Higher earners may be subject to an additional tax rate of 4%.
- Residents cannot claim an allowance before calculating their capital gains liability. Still, they can elect to have their gains taxed according to the regular income tax scales – in which case, they can apply a 40% allowance before the gain is taxable.
- Non-residents living in France must pay a withholding tax against all capital gains or sale proceeds, with rates of either 25% or 12.8% if the individual is exempt from social charges.
Rebates may apply depending on how long the asset has been held. There is a 50% reduction in the capital gains tax payable for assets owned for between two and eight years and a 65% deduction after eight years of ownership.
Paying Capital Gains Tax Against French Investment Property Sales
Like most countries, the French tax system means you are expected to pay a capital gains tax liability when you sell an investment property. However, there is an exemption if you were living in the building as your primary residence at the point of the sale.
For most expats, if they decide to sell a French property and can evidence that the building was their main home even for a minimal period, they will not have to pay any capital gains tax, regardless of the gain achieved.
Even if an expat living in France has used a property as a holiday home or rental asset but is living there at the time they sell, they will typically be eligible to claim full exemption.
Unfortunately, this works the other way around, which means a foreign national expat who sells real estate and uses it as a rental property, even for a very short period, and who had previously lived full time in the home, will likely be liable.
While there are scenarios where a property sale concerning a residence that was your permanent home within the last 12 to 18 months can be exempted or partially exempted, the status of the property sold can significantly impact the tax liability you attract.
Capital Gains Charges Against Real Estate Investment Properties in France
Capital gains tax rates on real estate investment property sales are taxed at a flat rate of 19% for gains up to €50,000, with additional surcharges of 2% to 6% for further gains. Social charges of 17.2% are also payable, although these can be reduced to 7.5% for foreign nationals from an EU or EEA country.
An agreement between the French and British governments in 2022 means that, in a post-Brexit climate, UK non-residents living in France or selling property there are exempt from paying social charges.
Therefore, the applicable capital gains rate can vary as follows:
- French residents: 36.2%, including tax and social charges, with an additional levy of 2% for gains over €50,00 and up to €100,000 and 1% for every extra €50,000.
- EU/EEA citizens: 7.5% - solidarity tax only.
- UK non-resident property owners: 7.5% - solidarity tax only.
Tapers are also applied, which means that the longer you have owned a property, the lower your tax obligation will be. Most real estate owners are exempt from capital gains after 22 years and from social charges after 30.
Calculating Your Capital Gains Tax Obligations as an Expat or Non-Resident Investor in France
We recognise that capital gains tax can be complex, with various exemptions, deductions, rebates, allowances, tax bases, and structures that will dictate the amount of tax you are obligated to pay and the financial benefits of owning and selling any investment asset or real estate in France.
It is also essential that long-term residents understand exit taxation, which can apply to those who have been residents in the country for six of the previous ten years, with company ownerships of 50% or more or shares worth over €800,000.
While not strictly a capital gains tax, the exit tax can be high. It is based on a 30% flat rate applied against potential gains—even for assets that remain in your ownership—with exemptions available for expats relocating to an EU country or location with a relevant tax agreement.
There are also complications for foreign national property owners or expat residents who own investment assets in their home countries since they may be liable to pay French capital gains tax while potentially having an obligation to declare the earnings or gains in another jurisdiction.
As with all financial matters related to your investments, property ownership, and products, we recommend consulting an experienced, regulated, and highly regarded team of wealth managers and tax advisers to review your assets and residency position and ensure you make informed, compliant decisions about the right ways to manage and declare your asset sales and disposals.
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About Chase Buchanan Private Wealth Management
Chase Buchanan is a highly regulated wealth management company that specialises in providing global finance solutions for those with a global lifestyle. We are global financial advisers, supporting expatriates around the world from our regulated European headquarters, and local offices across Belgium, Canada, Canary Islands, Cyprus, France, Malta, Portugal, Spain, UK and the USA.
Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15.
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