A comparative overview of capital gains tax for non-residents in France and UK

Since reforms taken by the French government in 2012, France has been seen by international property investors as being not tax friendly in comparison with the UK.

In addition to a capital gains tax (CGT) of 19%, non-residents had to pay in addition social charges (15.5%) making the tax bill an overall 34.5% of the net gains. Until recently, non-UK residents did not have to pay CGT on the disposal of their UK property, making the UK a primal choice for international investors.

The above tax overview has since changed.

Fortunately for French property investors, the European Court of Justice has sanctioned the French tax regime entailing a cumulative application of social security legislation of two Member States. The court ruled on the 26th February 2015 that this tax accumulation is contrary to European law, and therefore prohibited between Member States (European Regulation no 1408/71 whose purpose is to ensure the freedom of workers within EU).

Following this court ruling, we are expecting soon the French government to remove the taxation of social charges on non-residents.

Since the 1st January 2015, France has also fixed its CGT rate at 19% for all property owners, whether they are residing in EU or outside EU. Until the 31st December 2014, property owners, residing outside EU, Lichtenstein, Island or Norway had to pay a special CGT rate of 33.33%. This tax reduction only applies for individual owners. The rate remains at 33.33% for companies.

In UK, since 6 April 2015, non-UK resident persons (including individuals, trustees, personal representatives and certain closely-held companies), are subject to CGT on disposals of UK residential property. Non-resident individuals are now subject to CGT at the same rates as UK-resident individuals.

The following CGT rates apply in UK on non-residents:

18% or 28% (depending on the level of incomes) for individuals on gains above the annual exempt amount (the annual exemption for 2015/16 is £11,100)

28% for trustees or for personal representatives of someone who has died who is non-resident

20% for companies

Unlike the UK, France offers tapered reliefs to individual depending on the length of time the property was owned. Individual are exempt from CGT after 22 years. Tapered reliefs start from the 6th year of ownership, as follows:

No allowance for the first 5 years of ownership.

Between 6 and 21 years of ownership: 6% allowance per year.

For the final 22nd year of ownership: 4% allowance.

In conclusion, after the recent EU court ruling sanctioning the taxation of social charges on non-residents and the extension of CGT to non-residents in UK, the French tax regime for non- residents has become more competitive within the overseas property market and therefore attractive for international investors.

The golden rule for property investments will always remain “location, location, location!” but non-residents willing to invest in property in UK or France should take legal and tax advice  after taking consideration of their personal situation, the country of their residence (UK and France have indeed special rules to establish in which country an individual is a tax resident) and existing double taxation treaties.

Francophile legal Consulting can assist you with international property matters. For more information on this topic, please do not hesitate to contact Loic Raboteau, managing director by completing the form below.

The information that you give and that we obtain through you using this website may be used by this Company and by our partner companies only for purposes in connection with your use of this website and for marketing activities of this Company and partner companies. By using this site you confirm your consent to this. If you do not want to receive any marketing information from this Company and/or our partner companies then please notify us.

A little more about FRANCOphile Legal Consulting Ltd.

The company was created in response to the need of legal experts for international private clients and businesses. People are no longer confined within their own country boundaries to work, create a business or purchase assets. National, international laws and new technology have enabled people and businesses to move and expand internationally, creating a demand to resolve cross-border issues.

We are a London-based legal consultancy company dedicated to addressing our clients’ international needs. Whether you are a private individual moving or investing in a foreign country, an entrepreneur, or a business willing to expand internationally, FRANCOphile Legal Consulting Ltd will cater your specific requirements and will look after your interests in the short and long term.

Benefiting from an extensive network of international lawyers, solicitors, accountants and financial advisors based in London and in several jurisdictions, FRANCOphile Legal Consulting Ltd is able to handle your interests in different countries around the world.

Our approach and solutions are tailored to our clients’ needs. We believe that our clients are unique and warrant distinctive service.

Our international coverage includes France, London, Tunisia, Morocco, Egypt and Mauritius. If you would like to know more about us then fill out the contact form above and we will be right back to you.

The European Court of Justice ruling: social charges on non-residents is contrary to EU law.

All income generated by property assets held by individuals  residing in France are subject to social charges. The amended Finance Act for 2012 extended the scope of the payment of social charges to real income and real estate gains, from French sources received by non-resident individuals.

Since 2012, many non-French residents selling or letting their French properties had to pay those additional charges (15.5%) in addition to their capital gains or income taxes. This tax addition was highly criticised by the non-French residents as being discriminatory. A risk of double taxation was created on tax payers residing in a Member State.

The European Court of Justice in a judgment delivered on 26 February 2015, was asked to rule on the validity of the levy of social charges on patrimonial incomes perceived by a French-resident working in another Member State (Netherlands) of the European Union.

As expected, the Court has sanctioned the French tax regime entailing a cumulative application of social security legislation of two States. The court rules ruled this tax- accumulation is contrary to European law, and therefore prohibited between Member States (European Regulation no 1408/71 whose purpose is to ensure the freedom of workers within EU).

The court ruling is applicable to a French tax resident subject to the social security scheme of another Member State, and also applies to residents of another Member State when they are subject to social charges in France on their French property gains or incomes.

This decision should thus facilitate litigation cases already pending in France, opening the way for new claims for reimbursement of undue levies collected.d France have indeed special rules to establish in which country an individual is a tax resident) and existing double taxation treaties.

Francophile legal Consulting can assist you with international property matters. For more information on this topic, please do not hesitate to contact Loic Raboteau, managing director by completing the form below.

The information that you give and that we obtain through you using this website may be used by this Company and by our partner companies only for purposes in connection with your use of this website and for marketing activities of this Company and partner companies. By using this site you confirm your consent to this. If you do not want to receive any marketing information from this Company and/or our partner companies then please notify us.

A little more about FRANCOphile Legal Consulting Ltd.

The company was created in response to the need of legal experts for international private clients and businesses. People are no longer confined within their own country boundaries to work, create a business or purchase assets. National, international laws and new technology have enabled people and businesses to move and expand internationally, creating a demand to resolve cross-border issues.

We are a London-based legal consultancy company dedicated to addressing our clients’ international needs. Whether you are a private individual moving or investing in a foreign country, an entrepreneur, or a business willing to expand internationally, FRANCOphile Legal Consulting Ltd will cater your specific requirements and will look after your interests in the short and long term.

Benefiting from an extensive network of international lawyers, solicitors, accountants and financial advisors based in London and in several jurisdictions, FRANCOphile Legal Consulting Ltd is able to handle your interests in different countries around the world.

Our approach and solutions are tailored to our clients’ needs. We believe that our clients are unique and warrant distinctive service.

Our international coverage includes France, London, Tunisia, Morocco, Egypt and Mauritius. If you would like to know more about us then fill out the contact form above and we will be right back to you.

French property: the social charges 15.5% on incomes and capital gains coming to an end for non-French residents?

Since 2012, non-French residents selling their French properties have to pay 15.5% on gains generated in addition to the capital gains tax of 19%. These social charges were also taxed on rents perceived from the French property.

This tax addition was highly criticised by the non-French residents as being discriminatory. Many concerned people were questioning the reasons as to why they should pay social charges in France despite not living there and not perceiving any French social benefits from it.

A recent case is being heard at the European Court of Justice regarding the taxation of French social charges on non-French residents. On the 21st October 2014, the Advocate General has given his opinion that the French tax law (“article 29 de la loi de finances rectificative pour 2012”) was against the European Regulation no 1408/71 whose purpose is to ensure the freedom of workers within EU.

It is likely that the European court will rule that France’s law imposing social charges on non-French resident is illegal. As a consequence, the French government will have to amend his tax law in accordance with the European court ruling.

Can non-French residents who paid social charges make a claim?

Yes they can! There is however a time limit.

According to French tax procedural rules, the time for claiming taxes runs from one calendar year from the end of the year the taxes were paid.

Any non-French resident who sold his property in 2013 should take urgent advice and issue a claim to the French Tax Revenue before 31st December 2014. For those who sold during 2014, they should also act very quickly as the European Court decision is expected imminently and will not have a retroactive effect.

Francophile legal Consulting can assist you with international property matters. For more information on this topic, please do not hesitate to contact Loic Raboteau, managing director by completing the form below.

The information that you give and that we obtain through you using this website may be used by this Company and by our partner companies only for purposes in connection with your use of this website and for marketing activities of this Company and partner companies. By using this site you confirm your consent to this. If you do not want to receive any marketing information from this Company and/or our partner companies then please notify us.

A little more about FRANCOphile Legal Consulting Ltd.

The company was created in response to the need of legal experts for international private clients and businesses. People are no longer confined within their own country boundaries to work, create a business or purchase assets. National, international laws and new technology have enabled people and businesses to move and expand internationally, creating a demand to resolve cross-border issues.

We are a London-based legal consultancy company dedicated to addressing our clients’ international needs. Whether you are a private individual moving or investing in a foreign country, an entrepreneur, or a business willing to expand internationally, FRANCOphile Legal Consulting Ltd will cater your specific requirements and will look after your interests in the short and long term.

Benefiting from an extensive network of international lawyers, solicitors, accountants and financial advisors based in London and in several jurisdictions, FRANCOphile Legal Consulting Ltd is able to handle your interests in different countries around the world.

Our approach and solutions are tailored to our clients’ needs. We believe that our clients are unique and warrant distinctive service.

Our international coverage includes France, London, Tunisia, Morocco, Egypt and Mauritius. If you would like to know more about us then fill out the contact form above and we will be right back to you.

Many owners of a property in France will recall the various documents that were produced as part of the purchase process. The contracts, together with their annexes, will have been substantial.

Following recent legislation known as the Loi Alur, even more information is to be produced in advance of an apartment sale. This has left some agents, notaires and sellers feeling a little exasperated. The seller of an apartment is now obliged to produce extra information, including the co-ownership agreement, the latest accounts, work carried out by the managing agent, and Minutes of the AGM.

In practice, when instructed on an apartment purchase, we have always looked to seek this information, not least because the contract will often state that it has been produced to the buyer.

The rationale, then, of the law is to ensure that this information is indeed produced, and this is reasonable. A buyer should review previous AGM Minutes and co-ownership accounts: they could reveal problems such as future works that may be necessary, litigation and so on.

The problem though, especially prevalent with older buildings, is that many different notaires could have registered small amendments to the co-ownership papers, all of which will have to be obtained, increasing time and cost. Most of those amendments will probably have no relevance to the particular apartment.

This is likely, then, to increase the complexity of the process, without perhaps much relevance on a transaction. As to how this will develop, only time will tell.

For individual advice, please contact Matthew Cameron at Ashton KCJ here...

A bientôt!

Matthew Cameron

Head of French Legal Services.

We at Cle France - The French Property Network are proud to work in partnership with Ashton KCJ - Legal services. If we think our clients need further legal advice or have a specific legal question that needs solicitor involvement when buying or selling a property in France we can recommend Matthew Cameron and his team for expert advice.

Types of Certificat d'Urbanisme

I bet you did not know there are actually two types of certificat d’urbanisme ?

Certificat d’urbanisme d'information -

This merely states whether or not the land is zoned for building, together with information on public utilities and local taxes, and any rights of pre-emption that might exist on the site to the benefit of the commune.

If you have purchased land for building or redevelopment then you should have been provided with this document by the notaire at the time of purchase.

A certificat d'information does not state what permitted development may take place on the site, which is only elaborated by the more detailed certificate outlined below.

As a result, the certificat d'information is of limited value, particularly where there is any doubt about the status of the land, or what can be build upon it.

Certificat d’urbanisme opérationnel -

This sets out the rules on density, location and size of building that may be permitted, as well as any architectural rules that may apply and information on utilities and the requirements of public utility providors.

The certificate is not always highly specific where there are few planning constraints, as is often the case in rural areas.

If you have a specific project then you can provide basic details to the planning authority and, provided its complies with the planning rules, an operational planning certificate can be issued. You then have a fairly strong guarantee that a later planning application on the same terms will be approved.

A certificat d'urbanisme is valid for eighteen months, which can be extended for a year, provided the planning rules and services requirements have not changed. To extend the certificate you need to make application at least two months before the expiry of the current certificate.

Contact Us for more information on this issue and many more questions you may have.

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Blog submitted by: David at The French Property Network - Cle France.