Thursday, August 25, 2011

New CGT rules on sale of second home in France

As part of its austerity measures, the French government has announced new rules for the calculation of capital gains tax (CGT) on the sale of second homes - and certain other types of property, see below - with effect from today.

The principal measure is the abolution of the automatic abatement of 10% per per year of ownership, from years six to sixfteen, which had the effect of reducing the CGT to zero after 15 years. This will be replaced by a new calculation based on the rate of inflation during the period from initial purchase to sale. Details yet to be published on how this will be calculated.

In addition to second homes, the new rules will also apply to "empty properties, rental properties and land for building" (last three definitions also awaiting clarification) but will not affect main or principal residences, which are not subject to CGT on sale. To establish that your French property is your main or principal home requires proof of your resident status in France, for example a history of submitting French tax returns and being within the French healthcare system.

The new measures are expected to generate 180 million euros in 2011 and 2.2 billion euros in 2012.

Source: LeParisien 25 August 2011