The French government has already made lots of changes to the capital gains tax (plus value tax) over the last two years and they did it yet again! This time in order to stimulate house sales but also because the gains from the earlier changes have been disappointing. The government now hopes that these last changes will increase gains and sales. The commencement date for these changes is the 1st of September 2013.
A discount of 25% on the plus value or the taxable amount but this only applies on sales executed between 1 September 2013 and 31 August 2014.
The tax is made up of two parts, an income tax part of 19% and a social security part of 15,5%. Both percentages are taken from the plus value; the difference between the sale price and the acquisition price minus some discounts.
The 19% part will decrease with the time of ownership; after 22 years the tax will be non-existent (this used to be 30 years). The 15,5% will also decrease but it will be non-existent after 30 years (this hasn’t changed). Two separate calculations will have to be made.
Furthermore the income tax part will decrease with 6% per year starting after the 6th year of ownership and the social security part will decrease with only 1,65% per year during the first 22 years but between the 22nd and the 30th year, it will decrease with 9% per year.
Also as from the 1st of January 2013 any net plus value which is higher than 50.000 will be additionally taxed. With a plus value after discount of 50.000 maximum this additional tax is 0%, between 50.000 and 100.000 2% and increasing up to 6% for a plus value higher than 260.000.
All in all it is quite complicated and it can be best explained with an example. The house in the example is sold after 10 years of ownership
Income tax part:
Sales price 600.000
Acquire price -/- 200.000
Gross plus value 400.000
10 year ownership discount 30% -/- 120.000
Net plus value 280.000
Temporary discount 25% -/- 70.000
Plus value after discount 210.000
Total tax income part:
19% of 210.000 =39.900
additional tax (in this case 5%) over 210.000 = 10.500
Total tax income part: 39.900 + 10.500 = 50.400.
Social tax part:
Gross plus value 400.000
10 year ownership discount 8,25%. -/- 33.000
Net plus value 367.000
Temporary discount 25% -/- 91.750
Plus value after discount 275.250
Total tax social security part 15,5%:
15,5% of 275.250= 42.663,75
Total income tax and social security together:
Income tax 50.400,00
Social security 42.663,75 +
Note: If you sell your house after 22 years ownership, not only the 19% tax will be non-existent, the additional tax will be as well.