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Expenses you can offset against French capital gains tax
We have reported regularly on the changing capital gains tax landscape in France. Read our latest update here. The capital gain is the difference between the price you pay for a property that is not your primary residence and the price you get when you sell it. However, there is a range of expenses, prescribed by French law, which you can add to the purchase price, thus reducing the capital gain. These need to be calculated before your capital gains tax liability can be assessed.
Acquisition costs These are all the transaction costs incurred at the time you bought the property:
- Fees paid to the notaire (official who handles property transactions).
- Stamp duty.
- Commission paid to the realtor and/or property search agent.
If you don’t supply the supporting documents to the French tax authorities when you sell the property, a flat rate of 7.5% is added to the purchase price to represent the estimated transaction costs. This sum is normally less than the reality. Cost of building works You can add to the purchase price the cost of building works, including building, rebuilding, extension and improvement. To qualify, the work must have been carried out by a building firm. You can claim:
- Either the full cost of the work involved, provided you can produce the supporting invoices.
- Or, in the absence of supporting documents, a flat rate of 15% of the purchase price, provided you sell it more than five years after acquiring it.
The costs of day-to-day maintenance, repair and renovation are specifically excluded. So expenses you have incurred to keep the property in good order and to allow its normal use without alteration do not qualify. You might also like: The voluntary increase in stamp duty on French real estate transactions remains applicable from March 1st 2014 European Union regulations on real estate inheritance as of August 17th 2015 Paris real estate sales during the 3rd quarter of 2013 French real estate compared to other investment vehicles How to reduce the cost of co-ownership charges in Paris