The capital gain realized on the sale is calculated by subtracting the purchase price from the selling price. That amount is then reduced by certain expenses, including fees paid to licensed real estate agents (at purchase or sale), notaire fees paid by the seller when he purchased, and certain renovation and improvement expenses. After 5 years of ownership, a seller can either itemize actual renovation expenses, or add 15% of the purchase price to the basis of the property as the value of improvements (even if no improvements were made).
Capital gains tax:
There is no capital gains tax on the sale of a primary residence in France.
For a secondary residence owned either individually or through an SCI, the amount of capital gains owed at the time of sale is determined by (1) the fiscal residence of the seller, and (2) the number of years that the property was owned by the seller.
As of January 2015, a base rate of 19% capital gains tax is imposed on the sale of real property by any individual, regardless of his residency. Under prior law, rates varied between 19-50% depending on the seller’s country of residence.
The base amount of tax owed is reduced starting after 5 years of ownership, as follows:
Years 6 through 21: 6%/year
Year 22: 4%, after which there is no capital gains tax to pay upon sale.
Until January 2015, a further 15.5% of the gain realized on the sale was paid to the government as social charges (essentially payroll tax). The social charges were also subject to a reduction schedule, albeit over a 30-year period.
A court has again intervened, this time to declare such charges illegal as applied to residents of other EU countries. Regulations are expected to broaden the reversal of social charges such that they will only be imposed on French residents.
Both of these laws are set to apply retroactively up to two years.
Any tax due is calculated and collected by the notaire at the closing of the sale. A nonresident seller who owes tax on the sale is required to take out a guarantee that insures that the correct amount of tax was paid. The cost of this insurance is about 1% of the selling price of the property. This requirement will probably be eliminated, at least for EU-resident sellers, once the expected regulations are issued.