Selling property: are there similar exemptions (main residence, etc.) for non-residents and residents?

Non-residents realizing a real estate capital gain may, under certain conditions, benefit from the following exemptions:

Total exemption in the case of the sale of a primary residence in France

As from 1 January 2019, a non-resident who sells property which was his/her main residence in France on the date he/she transfers his/her tax domicile outside France (EU Member State or countries which have signed a mutual administrative assistance agreement to fight tax evasion and tax avoidance and a mutual administrative assistance agreement for tax collection with France) may have his/her capital gains on the sale of property entirely exempted from tax subject to two conditions:

• The sale is carried out by 31 December of the year following the year in which the tax domicile was transferred outside France at the latest, and

• The main residence has not been made available to a third party between the transfer and the sale, either free-of-charge or for valuable consideration.

Otherwise, a 19% levy will be applied to the capital gains on property irrespective of the seller’s country of residence. It will also be subject to social security contributions at the overall rate of 17.2%.

Since the taxation of property income received in 2018 and capital gains on property made since 1 January 2019, persons affiliated to a compulsory social security scheme, other than French, in an EEA country (European Union, Iceland, Norway, Liechtenstein) or Switzerland, are exempt from the general social contribution (CSG) and the contribution to the reimbursement of the social debt (CRDS).

Although the United Kingdom left the European Union on 1 January 2021, British residents continue to benefit from this exemption from CSG and CRDS.

However, such income remains subject to a solidarity levy at the rate of 7.5%.

Exemption up to €150,000

Paragraph 2° of II of Article 150 U of the General Tax Code stipulates an exemption for capital gains made on the disposal of an accommodation unit located in France by individuals, who are not residents of France and who are nationals of an EU Member State or of another country party to the Agreement on the European Economic Area (EEA) which has signed a mutual administrative assistance agreement with France to fight tax evasion and tax avoidance.

State, local authorities or public-sector hospital agents working abroad, who are residents of France for tax purposes, are entitled to this exemption.

The exemption does not apply when the property is owned through a legal entity (i.e. a property holding company, SCI).

Conditions for exemption

The exemption is limited to one residence per taxpayer and is capped at €150,000 of taxable capital gains. The proportion of the capital gains over €150,000 is taxed under ordinary law conditions.

This exemption cap is assessed vis-à-vis the seller.

Common law spouses or undivided co-owners

Both common law spouses and undivided co-owners each represent a sole seller and capital gains are taxed separately for them. The €150,000 capital gains exemption cap is assessed individually on the portion of the capital gains made by each common law spouse or undivided co-owner.

Married couples or co-sellers

When a property is sold jointly by a married couple, the spouses are deemed to be co-sellers.

Nevertheless, the €150,000 upper limit for the capital gains exemption may be assessed in the same way as for undivided co-owners on the basis of the proportion of the property owned and, therefore, on the capital gains attributable to each spouse and not on the total capital gains made by the couple.

Therefore, a married couple could claim an exemption capped at €300,000 of the total capital gains if they sell a jointly-owned property.

Terms

This exemption shall apply, within the limit of one residence per taxpayer, subject to the following conditions:

• The seller must have been continuously resident of France for tax purposes for at least two years at any time prior to the sale

Important: Proof of continuous residence in France for at least two years may be provided by any means, in particular by producing residence tax assessment notices for the principal residence or tax notices for the two years in question. The seller may claim years during which he was, as a minor, a member of the tax household of his or her parents, who were themselves domiciled for tax purposes in France.

• The sale must be made by 31 December of the tenth year following the year when the seller transferred his or her residence for tax purposes outside France (31 December of the fifth year for sales carried out prior to 1 January 2019), or, with no conditions as to time limits when the seller has had free disposal of the property at least since 1 January of the year preceding the sale.

To go further : Selling property : tax arrangements and rate.

UPDATED DINR PART - JULY 05, 2022