2022: Non-residents benefit from changes in real estate capital gains

When selling a home in France, people who have expatriated or who are thinking of settling abroad are most often exempt from capital gains tax in 2022. In the event of taxation, the amount of social security contributions should be reduced.

In 2022 , the taxation of real estate capital gains of non-residents remains reduced. Thereby :

• The sale of the former principal residence in France may be exempt;
• The sale of a home in France may be exempt 

In addition, the subjection of non-residents to social contributions is maintained but the rate may be reduced.

The former main residence in France exempt from capital gains tax

Until the end of 2018, a person who had just left France and who put their former main residence up for sale, there was a capital gains tax applied to the principle. Indeed, the law did not grant a “reasonable period” to sell, a period enjoyed by all French residents who sell their main residences abroad and move to France. For them, this reasonable period is in practice one year, subject to sale at a market price, by sufficient means of promotion and without the accommodation ever being rented or lent.

In 2022 , some non-residents will benefit from this tax exemption. Indeed, since January 1, 2019, an individual, regardless of their nationality, who sells their former main residence in France is exempt from capital gains tax:

• If they leave to live in a member state of the European Union or in a State that has concluded an assistance agreement with France with a view to combating fraud and tax evasion;
• and if the sale occurs no later than December 31 of the year following that of their move outside of France (the period can therefore reach two years). During this period, the accommodation must not have been rented or loaned for any reason whatsoever

The exemption applies to both the accommodation and its outbuildings (cellar, garage, additional rooms and residences) when their sale takes place simultaneously.

The capital gains tax exemption relaxed specifically for non-residents 

Non-resident nationals of a State of the European Union benefit from a specific case of exemption. This has been relaxed since January 1, 2019.

In 2022, a European national (a person who has the nationality of one of the EU countries) who leaves France for any country in the world finds himself exempt from taxation on the capital gain realized if the following two conditions are met:

• The person was domiciled for tax purposes in France for at least two years at any time before the sale;
• Or the sale takes place:                           
  • either within ten years after their departure (compared to five years until the end of 2018) if the person does not have free disposal of the property (it is rented for example);
  • or at any time that they have free disposal of the accommodation at least since January 1 of the year preceding the sale.

The tax exemption is not total since it is limited to the fraction of the taxable net capital gain which does not exceed €150,000 (the surplus is taxable under normal conditions). However, this is a very high amount of capital gain, especially since it is calculated after deductions for the holding period. It makes most sales exempt from taxation… and greatly reduces the tax of others.

Real estate capital gain: European non-residents subject to reduced social security contributions

Apart from the two cases of exemption above, the real estate capital gain realized by a non-resident when selling a home in France, is taxed under the same conditions as a French resident, i.e. up to: 19% income tax + 17.2% CSG and other social contributions (CSG 9.2% + CRDS 0.5% + solidarity levy 7.5%) = 36.2%.

Non-residents also bear, like residents, any surcharge on capital gains exceeding €50,000 and any tax on the sale of land that has become constructible.

However, taxation under social security contributions has been at the heart of a legal tussle between France and certain non-resident taxpayers, a fight arbitrated by the Court of Justice of the European Union (CJEU). In a “De Ruyter” judgment of 2015, the CJEU decided that the fact that a person is affiliated to a social security scheme of a State of the European Union does not allow France to subject him to French social security contributions.

After many adventures… which may not be over, the situation in 2022 (as of January 1, 2019) is as follows:

• With regard to people, whatever their nationality, who come under a social security scheme in the European Economic Area or Switzerland, are exempt from CSG and CRDS… but remain liable for the solidarity levy of 7 .5%, i.e. an overall tax on the real estate capital gain of 26.5%.
  Despite the “Brexit”, British residents benefit from this reduced rate if they meet the following conditions:
  – They are registered with British social security;
  – They are nationals or legal residents of France, the United Kingdom or another Member State of the European Union;
  – They are not covered by a mandatory French social security scheme. 
• With regard to persons affiliated to a social security scheme in a non-European third country, the CSG and other social contributions are due in full at the rate of 17.2%, i.e. an overall tax on the capital gain on real estate of 36.2%.

A Russian who has always resided in Russia and who sells his secondary residence in France in 2022 is taxed at the overall rate of 36.2% (19 + 17.2).

On the other hand, if this same person resides in Finland, the sale will be taxed at the global rate of 26.5% (19 + 7.5).

Sources:

• article 244 bis A of the General Tax Code;
• article 150 U, II-2° of the General Tax Code;
• article 136-7, I ter of the Social Security Code;
• Article 16 of Ordinance No. 96-50 of January 24, 1996 relating to the reimbursement of the social debt;
• article 235 ter of the General Tax Code;
• list of the 27 members of the European Union (EU);
• list of the 30 members of the European Economic Area (EEA);
• exemption for the transfer of a dwelling located in France by non-residents, BOFIP paragraphs 220 et seq .;
• official information on the impots.gouv.fr website ;
• information on the sarf.fr website ;
• Brexit: list of questions/answers for individuals on the impots.gouv.fr website .

Source:    PAP.fr