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I am thinking of buying a property in France what are the capital gains and other tax implications?

The rate of Capital Gains Tax for EU residents is 16% of the net gain with French residents paying an extra 10% in French National Insurance making the effective rate 26%.  If you are not a resident of an EU country the rate is 33.3%.

As in the Ireland, your “principal residence” is exempt from capital gains tax provided that you are tax resident  Therefore this will not apply if you have never entered the French tax system, or completed a tax return.  You are also exempt from French CGT if you are in receipt of an old age pension or are an invalid even if you are a non-resident.

You are taxed on the sales price less the purchase price and any major renovation bills.  There is now no inflation allowance. The resulting figure is subtracted from the sale price to calculate the taxable gain.  The conditions of acceptance of “renovation work” are very stringent as they must be carried out by a registered French artisan who can produce appropriate invoices.  Invoices for materials you have purchased yourself are not allowed. An “expert evaluation” of the work done is also not allowed.

The occupier of the French property is liable for Habitaion Tax (Taxe d'Habitation). It is due of the 1st January and is payable by the person who was the occupier at that date. There are exemptions for over 60s and also if the property is incapable of occupation due to it needing extensive renovation. The test is whether the property is furnished and whether you can convince the local mayor.   The owner is also usually liable for Funamental Tax (Taxe Foncière) also known as 'impôt foncier', a land tax which is generally payable in one lump sum on the 1st January in each year. Unlike the taxe d'habitation, apportionment can be made between the buyer and seller. If there is an apportionment this should be stated in the contract for sale. This tax is even payable on unbuilt land. It may be divided into two parts, one for the building and some of the land surrounding it, the other for the remainder of the land. There are exemptions for some agricultural land and the owners of new property have, at the time of writing, a two year exemption.

As a non-resident property owner in France, you may be liable for income tax, value added tax wealth tax, capital gains tax and inheritance tax. Individual situations vary considerably and it is best to seek specialist advice from a tax consultant who has knowledge of the French tax system.

Louise Carey is an Accountant/Tax Consultant based at 32 The Square, Listowel, Co Kerry, tel: 068 21109, email:lc@taxconsultant.ie, www.taxconsultant.ie