Capital gains on property sold by a non-resident are calculated using a precise method set out in the French General Tax Code. Understanding this method lets you anticipate the tax due before you even sign the preliminary sale agreement, identify the levers for reducing it, and avoid unpleasant surprises when the notary draws up the final statement. This guide details each step, with worked examples.

The calculation follows five successive steps:

• Determine the sale price (net sale price to the seller).
• Determine the acquisition price, increased by deductible costs and works.
• Calculate the gross capital gain by subtracting one from the other.
• Apply the taper relief for length of ownership.
• Apply the tax rates (capital gains tax, social charges and any surcharge).

Each step follows precise rules, and an error at any one of them can significantly shift the final result.

The sale price is the price actually received by the seller, less certain costs borne by the seller in connection with the sale, such as mandatory survey costs, mortgage release fees and any compensation paid to a tenant for leaving the property. These deductions must be supported by invoices and are stated in the deed of sale.

Conversely, the sale price is increased by any capital charges stipulated for the seller’s benefit, which is rare in practice.

The reference acquisition price is the price stated in the original purchase deed, or the value used when the property was received free of charge (inheritance or gift). Two types of increase are added to this price.

Acquisition costs

The seller can choose between two methods when filing the return: either use the actual costs (transfer duties, notary fees on purchase, agency fees) with supporting documents, or apply a flat rate equal to 7.5% of the acquisition price. The 7.5% flat rate applies automatically without supporting documents. For most transactions, the flat rate is more advantageous than actual costs.

Improvement works

Improvement, construction, reconstruction or extension works carried out since the acquisition can be added to the acquisition price. For a property held for more than five years, the seller can choose either to use the actual works costs on contractors’ invoices (works carried out yourself are not taken into account) or to apply a flat rate of 15% of the acquisition price. The 15% flat rate is often preferred for properties held for a long time, because it is simpler and because invoices have sometimes been lost. Maintenance and repair costs, however, are not deductible.

Gross capital gain = sale price – increased acquisition price. It may be negative, in which case it is a capital loss, which for private individuals is neither taxable nor deductible from other capital gains.

The gross capital gain is then reduced by progressive taper relief, calculated differently for capital gains tax and for social charges.

For capital gains tax (19%)

• No relief from the 1st to the 5th year.
• 6% per year from the 6th to the 21st year (i.e. 96% in total after 21 full years).
• 4% for the 22nd year.
• Full exemption from tax from the 22nd year onwards.

For social charges (17.2%)

• No relief from the 1st to the 5th year.
• 1.65% per year from the 6th to the 21st year.
• 1.60% for the 22nd year.
• 9% per year from the 23rd to the 30th year.
• Full exemption from social charges from the 30th year onwards.

The following are applied to the taxable gain after taper relief:

• 19% capital gains tax.
• 17.2% social charges (or a 7.5% solidarity levy for residents of the EEA or Switzerland who are covered by a local social security scheme).
• The progressive surcharge on property capital gains above €50,000, from 2% to 6% depending on the scale.

Take a seller resident in the United Arab Emirates (Dubai) who owns a flat in Paris.

• Sale price: €500,000.
• Acquisition price: €250,000.
• Flat-rate acquisition costs (7.5%): €18,750.
• Flat-rate works (15%): €37,500.
• Increased acquisition price: €306,250.
• Gross capital gain: €193,750.

With 12 years of ownership, the relief for capital gains tax is 7 full years × 6% = 42%. The gain subject to capital gains tax = 193,750 × (1 – 0.42) = €112,375. Tax at 19% = €21,351.

For social charges, the relief is 7 × 1.65% = 11.55%. The gain subject to social charges = 193,750 × (1 – 0.1155) = €171,374. Social charges at 17.2% = €29,476.

Total tax = €50,827, or about 26% of the gross capital gain. Relative to the sale price, the tax represents about 10.2%.

• Confusing maintenance costs (not deductible) with improvement works (deductible).
• Forgetting to opt for the 15% flat rate for works when it is more advantageous than the actual invoices.
• Miscalculating the length of ownership, which is counted in full years completed on the date of sale, not in months or calendar years.
• Overlooking the surcharge on taxable capital gains above €50,000.
• Not checking the tax treaty with your country of residence to anticipate any double taxation.

The calculation presented here lets you anticipate the order of magnitude of the tax. The official return, on form 2048-IMM, is the responsibility of the accredited tax representative, who commits its guarantee to the French Treasury. ACCREDITAX puts you in touch with the representative offering the best balance of fees, timelines and guarantees for your case.