Property Tax Relief In France

The French Tax Act 2014 provides interesting reliefs for residents and non-residents alike on the sale of French property, explains Cecile Acolas of Rosemont Consulting.

Property sales completing between 1st September 2013 and 31st August 2014 will benefit from a temporary exceptional allowance of 25% on any capital gain.

New allowances grant a full exemption on the capital gain after 22 years of ownership. However, full exemption from social contributions on the capital gain applies only after 30 years ownership.

Capital gains in excess of €50,000 are additionally taxed at variable rates from 2% to 6%. A temporary income tax applicable to high levels of income will also be levied at 3% or 4% depending on the capital gain.

Rosemont Top Tips

• For new acquisitions and current ownership, analyse the impact of the private capital gain regime versus the professional capital gain regime. It’s an opportune time to consider restructuring ownership.
• VAT - from the 1st January 2014 new rates apply. The standard rate has increased to 20%. The intermediate rate of 7% increased to 10% but the reduced rate of 5.5% decreased to 5%. We advise that all conditions are fulfilled to benefit from intermediate VAT rate on building works and related services.
• Non-residents owning French shares: the general tax allowance on the sale of securities has increased to 50% after 2 years ownership, 65% after 8 years ownership. Specific tax allowances can apply at rates of up to 85%, applicable to companies incorporated less than 10 years, family restructuring and retirement.
• Before moving to France or investing in France consider the use of a holding company to optimise the gain on subsequent sale.
• Interest and dividends received in 2013 by French tax residents will be subject to the progressive income tax rate. The allowance of 40% on dividends remains unchanged, subject to conditions.
• Foreigner nationals looking for a tax efficient way to settle in France: life insurance policies have changed but remain interesting. Inheritance tax on the transfer of life insurance contracts of over €700,000 (after deduction of €152,500 allowance per beneficiary) will increase to 31.25%.

Changes Afoot  

The Franco Monegasque Double Tax Treaty (DTA) was applied to foreign nationals resident in Monaco, allowing foreign residents in Monaco inheritance planning opportunities.

The Franco-Swiss DTA will apply to a Swiss resident selling French property or SPI shares: individuals will benefit from a reduced tax of 19% on the capital gain.

A non-French national resident in Monaco who has French property available for use is no longer taxed on the notional rental income of that property. Tax already paid and CGT at 33.33% (instead of 19%) can be reclaimed.

For advice on French and Monaco property and residence planning contact:

Cecile Acolas
Managing Director.
Rosemont Consulting SARL
Les Villas del Sole
47-49, boulevard d’Italie
Monaco
Tel. +377 97 70 20 80
Fax. +377 93 50 14 74
email: c.acolas@rosemont.mc