Friday, April 17, 2015

Buying a second home in France

If you already live in France and decide you wish to move and buy another property, then you need to plan your sale and purchase carefully to ensure the optimim tax benefits.

If your present home in France is recognised by the tax authorities as your 'main and principle residence' and you submit French tax returns from this address, then on sale your home will not be subject to the property taxes (capital gains tax) and charges that apply to selling  second homes in France. If you acquire your 'second' home before selling the primary home (and move into it) then you normally have 12 months to sell the first home, without it attracting capital gains tax. In today's slower property market you may find it difficult to sell a property within this period of time, which can accordingly be risky if you wish to avoid the tax - and also repay a bridging loan (normally repayable within two years).

In order to reduce these risks, you could sell your first home before committing to purchase the second home - this requires perseverance and a cetain amount of juggling between buyers and sellers, if one transaction (buying your new home) depends on the other (selling your existing home) - but it can be done. I have found that using the same Notaire to handle both transactions can help ensure the process runs smoothly. In the worst circumstances you might have to move out of you first home and move into temporary accommodation until completion of your second (new) homes.

Alternatively, you can purchase your second home but continue to remain in the first home until you manage to sell it (free of capital gains tax), as the second home would not be liable for CGT unless you decided to sell it while you first home was still designated as your principal residence. 

With careful timing and good advice, selling one property and buying another in the above circumstances should be relatively straightforward.