Changes to French Capital Gains Tax
A change in the French capital gains tax system was announced on the 16th June 2013 by President François Hollande. These changes specifically affect the sales of second homes in the country and ain to inject greater flexibility into the property market.
Currently the French property market is immobile, with the economy, tax rates, and financial recession all contributing to the lack of movement. Government plans drawn up by the French Budget Minister Bernard Cazeneuve propose reformation of real estate capital gains tax in France. This will apply to capital gains realized from the sale of real estate, other than a taxpayer’s main residence and rented property.
The changes are duet to come into effect on the 1stof September, 2013 and will be included in the 2014 finance bill. The following changes are due to be made:
- Progressive tax reductions on the holding period of capital gains. The qualifying period for full exemption from income tax on real estate capital gains is lowered to 22 years, from 30 years.
- Progressive social levy reductions for social contributions (CSG/CRDS). After 30 years complete exemption from social contributions will be granted.
- A 25% tax reduction will apply to property sales realized between September 1, 2013, and August 31, 2014 to give an initial boost.
- Government fiscal incentives encouraging constructible land retention are due to be abolished in favour of the housing development market.
These tax reductions are significant in making the French property market much more accessible and profitable. By offering a short term 25% reduction the activity in this market should increase in a fairly short period of time and introduce recovery into the property market for the long term.
