buying land in France, buying or selling lan in France, Capital gains tax, capital gains tax on French land, capital gains tax on French property, French land capital gains tax, French land capital gains tax change, French property capital gains tax, selling land in France
Update from the 18th of January 2014: The French Constitutional Court approve the capital gains tax reform for houses/flats but cancel the reform for building lands:
In our post “Capital gains tax on French property: latest updates and calculations (part 1)” we already mentioned that the capital gains reform will not apply to building lands. On the contrary, capital gains tax on building land remains the same as it stands now and after the 1st of September 2013*. Things will even get worse after the 1st of March 2014 (update from the 21st of October 2014, following a vote from the French Parliament), then all rebate will be cancelled, which means that anybody who owns a building land in France and sell it, will have to pay 34,5%** of the amount of capital gains even if the land was acquired more than 30 years ago! The French government expectation is to “unfreeze” a stock of building lands before the end of the year, to generate more building of houses and flats next year…However, it is moot whether it is going to work or not.
Consequently: if you find a building land owner, who is very keen to sell, he might do the extra mile to sell it before the end of the year. It is good to have an idea whether the owner has owned the land for a long time or not, as the longer the more tax he will have to pay after the 1st of March 2014 compared to the current tax rules…You might have the opportunity to negotiate an additional rebate. Unfortunately, in many areas building land are scarce (e.g. in the Alps, in most coastal areas…) and it is not very likely that you might be in a position to negotiate an additional good rebate. Also, those sellers not in a hurry to sell, may think that the government might revisit the tax rules for building land within a few years…Therefore, it might even be harder to find the building land of your dream after the 1st of March 2014…However you still need to factor the time for the obtention of the planning permission and the following time for possible appeal from third party against the planning permission.
*Under the current tax rules, the capital gains tax is fully exempted for land detained for more than 30 years, and there is a very slow “smoothing factor” to decrease the amount of capital gains from the 6th to the 30th year. This factor is -2% every year from the 6th to the 17th year, -4% from the 18th to the 24th, -8% from the 25th to the 30th, leading to no capital gains tax after 30 years. This factor is the same for the 19% tax and the 15.5% social charges. Example: the capital gains on your building land that you acquired in March 1992 amounts to 182 500 euros, before the 1/01/2014 the amount you will have to pay to the French state will be 37 777 euros, from the first of January 2014 it will jump to 62 962 euros. Of course this new tax rule still has to be backed by the French parliament. For a land acquired more than 30 years ago, the amount due to the French state will jump from 0 euro before the 1/01/2014 to 62 962 euros after! There is no additional tax above 50 000 euros of capital gains for land.
**For French and EEA (European Union, Iceland and Norway) residents, for residents of other countries it would be even higher at 48.83%. and up to 75.5% for the residents of the very few “non cooperative” countries on tax matters.