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For some years now, the French tax system has been like the discount chains that encourage consumers to buy with exceptional and temporary discounts!

In line with this approach and to 'ease' the property market, on 18 July 2013 the French Budget Minister, Bernard Cazeneuve, announced an exceptional 25% allowance on capital gains on property sold for valuable consideration between 1 September 2013 and 31 August 2014.

Some time ago, you had to sell quickly before the allowance was extended from 15 to 30 years. Now, you have to sell within a relatively short period to benefit from this exceptional 25% allowance. At the same time, we are once again modifying the tax allowances for holding periods, setting up a veritable "gas factory".

It has to be said that there is a good chance that this exceptional allowance will do nothing to ease the property market, which needs tax stability and medium- and long-term visibility. What will happen after 1 September 2014, when the exceptional allowance is no longer in force? There will certainly be a drop in transactions, with owners preferring to wait for the new "tax balances".

Scope of the 25% capital gains allowance

Firstly, the allowance does not apply to all property and property rights.

The 25% allowance applies to capital gains arising from the sale for valuable consideration of real estate or rights over real estate, with the exception of :

building land or rights relating thereto

Shareholdings in companies or groupings covered by articles 8 to 8 ter of the General Tax Code;

units in a property investment fund;

property or rights mentioned in b to h of 3 of I of article 244 bis A of the General Tax Code;

On the other hand, the 25% allowance applies to net capital gains realised following disposals for valuable consideration during a specific period, i.e. from 1 September 2013 to 31 August 2014, and excluding disposals for the benefit of :

- the transferor's spouse or partner under a civil solidarity pact, cohabiting partner, descendant or ascendant, or one or more of these persons ;

- a legal entity of which the seller, his or her spouse, his or her partner in a civil solidarity pact, his or her cohabiting partner, or a descendant or ascendant of one or more of these persons is a shareholder or becomes one at the time of this sale.

Calculation of the 25% allowance on capital gains

The 25% allowance is used to calculate the net capital gain after the holding period allowance and before taxation. It should be remembered that this tax is 34.5%, made up partly of 19% capital gains tax and the remaining 15.5% social security contributions, CSG and CRDS.

It should be noted that from 1 September 2013, the allowance for length of ownership will be calculated in two ways. Social security contributions will be reduced by 100% after 30 years, and capital gains will be taxed after 22 years.