This tax is to be paid if you are the owner on the first of January of the year of purchase. It is set for the whole year, according to your situation on the first day of the year.

This tax is to be paid by the person living in the apartment.

In France, there is a wealth tax payable when your capital assets reach a certain ceiling. If the value of your capital assets, real estate properties and movables (minus debts, principally loans, mortagaes etc..) in France, exceeds 720 000 Euro. You will be liable to taxation on the amount over and above , based on a sliding scale.

The new rules in French Capital Gain Tax apply to all sales after 1st January 2004.

Exemption of Capital Gain Tax:

Amongst others, the following exemptions from CGT are specified:

1. Main residence of the owner on the day of sale.
2. The dwelling in France of physical persons who are not French resident but who are EU p citizens, with a limit of one residence per tax payer and under the condition that they have been fiscally domiciled in France in a continuous way for at least two years at any time prior to the sale;
3. The adjoining and necessary outbuildings of properties mentioned in the above two paragraphs provided that they are sold at the same time as those properties;
4. When the sale price is less or equal to 15,000 Euros.
5. In the case of expropriation generating a capital gain. In this case, if the sale is followed by a purchase in property within 12 months, there will be exemption.

Expenditure that can be offset:

Construction, reconstruction, extension, renovation or improvement works which are borne by the vendor and undertaken by a company from the time of completion of construction of the property or its purchase if later, provided that the cost has not been offset for income tax purposes and it is not rental expenditure (e.g. works such as simple redecoration). When the tax payer sells a property five years after purchase and is not able to provide proof of the expenditure, the original purchase price is increased by an amount equal to 15% thereof (to represent the cost of the works).

Tapered relief

For each year of ownership beyond the first five years since purchase, the capital gain is reduced by 10%. This means that upon fifteen years of ownership, the reduction is 100% and there is
- no CGT to pay.
- Tax free allowance

For any sale, there is a tax free allowance of 1,000 Euros.

Time of payment

The tax has to be paid at the time of sale and will be taken from the sale’s proceeds (the system that already applied to non-residents). The tax return is made at this time and no longer forms part of the annual income tax return.

Tax rate

• 26 % for the French Residents
• 16 % for the residents of an EU country (except France!)
• 33,33 % for the residents outside of the EU

The basic rule here is that the inheritance of French real estate is subject to the French Law. The French inheritance law differs from that of many countries, mainly because a surviving spouse does not necessarily inherit the total amount of his/her partner's patrimony.

In order to modify this inheritance system, and especially toughen up the surviving spouse's rights, there are many possibilities. The rate of the inheritance tax depends on the link between the beneficiary and the deceased and the value received.

We can help you find the adequate professional advice to get the optimal information according to your overall family status. This guide can do no more than highlight the various subjects to be considered when purchasing or selling a property in France.

Drawing upon its substantial experience of the French investment property market, Conseil Patrimoine will be happy to expand the matters touched on in the guide or put you in touch with the appropriate legal advice.