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.The French ministry of Finance has just published a document disclosing further details of the capital gains tax.
Contrary to the market expectation, the 25% rebate should also be applied to the “social charges” (in plain French “les charges sociales, CSG et CRDS”). This would make the reform more favourable, although still not as favourable as it was before 2004 for most of the cases. (see our first blog “French property the new reform of capital gains tax”)
However, the document is more cautious in relation to whether the date of the “compromis de vente” (pre contract) should be considered valid for the “cut off” date of the 1/09/2013 and 31/08/2014. The document refers to the realisation date of the “condition suspensive”* (e.g. if you applied for a mortgage as mentioned in the “compromis de vente” it would be the date when your mortgage would be granted by your bank).
We undertook a quick recalculation in order to take into account the 25% rebate applied to the social charges. In the example in our blog “Simulation of capital gains tax for 2013 and 2014 for a French property” (1/08/2013), the amount to pay to the French state on capital gains would be:
(for a flat acquired 160 000 euros the 1/03/2002, and sold 290 000 euros, the capital gains after deducting the 15% refurbishment flat rate and 7.5% acquisition cost are 94 000 euros)
|amounts in euros||property sold before 31/08/2013||property sold between 1/09/2013 and 28/02/2014||property sold between 1/03/2014 and 31/08/2014||property sold after 31/08/2014 and before 1/01/2015|
|total amount to pay on capital gains calculated on the 1/08/2013 blog post||30,193||21,701||20,656||24,062|
|% of 94 000 euros of capital gains||32%||23%||22%||26%|
|new amount to pay including 25% rebate on social charges||30,193||18,419||17,434||24,062|
|% of 94 000 euros of capital gains||32%||20%||19%||26%|
warning: the above simulation includes a 19% rate which only applies for EEA residents (European Union+Norway+Iceland), for non EEA resident it is 33.1/3%, and 50% for resident of “non cooperative” countries on tax matters. Refer to our post “Simulation of capital gains tax for 2013 and 2014 for a French property” (1/08/2013)
We will come back with additional simulation as the consequences of the reform vary, depending on how long you have owned the property and the amount of capital gains.
As a reminder these simulations are based on assumptions, as the reform disclosed by the Minister of Finance will have to be backed by the National Assembly, and not repelled by the “Conseil Constitutional”. Therefore caution should prevail.
Also, building land should see any rebate and smoothed factors to be cancelled. Therefore the capital gains tax rate would be 34.5% from 1/01/2014 whichever the date you acquired the land.
You may now download a tax calculator on the “useful tools” page of our website:http://www.alps-property-france.com/#!useful-tools/cl5u
* We will come back to the “condition suspensive” in a future post.