Real estate capital gains exemptions for French non-residents

If you are a nonresident for tax purposes and are considering selling real estate located in France, you may wonder under what circumstances you could qualify for a capital gains tax exemption.

What is a French tax resident?

Under Article 4B of the French General Tax Code (CGI), a French tax resident is a person who meets one of the following conditions:

has their tax domicile in France, meaning that they habitually reside there. If you habitually and permanently reside in France with your spouse (or PACS partner) and, where applicable, your children, then your household is located in France. In the absence of a household, your primary place of residence is determined based on your actual presence in France.
carries out their main professional activity there: If you spend most of your actual working time on a professional activity in France, that activity is considered your main activity in France.
or has their center of economic interests there: If income from French sources exceeds income from foreign sources, this indicates that this person's center of economic interests is located in France.

In other words, if a person meets one of these conditions, they are considered a tax resident in France and are subject to French income tax on all their worldwide income.

Regarding the sale of a residence, there are two cases:

- a former main residence;

- a property that was not a primary residence.

Conditions for a total exemption from capital gains tax when selling a former primary residence

If you are considering selling a former primary residence, it is important to understand the conditions that allow you to benefit from a total exemption from capital gains tax, including income tax and social contributions. First, to be eligible for this exemption, the property must have been your primary residence on the date you transferred your tax residence outside France. This means that the property had to be the place where you usually and permanently resided. In addition, you must own the property directly or through a partnership to be eligible for this exemption. It is also important that your current country of tax residence has signed an administrative assistance agreement with France to combat tax fraud. The sale of the property must be completed no later than December 31 of the year following the year in which you transferred your tax residence outside France. It is also important to note that the property must not have been rented out or lent free of charge since you moved abroad. Finally, you must not have already benefited from the €150,000 capital gains exemption when selling a property after moving abroad in order to qualify for this total exemption from capital gains tax.

Conditions for a partial exemption from capital gains tax when selling a property that is not a primary residence

When considering selling real estate that was not your primary residence at the time you relocated abroad, it is essential to understand the conditions that may allow you to benefit from a partial capital gains tax exemption. You will be exempt up to €150,000. To qualify for this exemption, several criteria must be met. First, the property must be sold no later than December 31 of the 10th year following the year in which you transferred your tax residence outside France. However, this time limit may be waived if you have had free disposal of the property since January 1 of the year preceding the year of the sale. In addition, you must be a national of an EEA country (European Union, Norway, Iceland, or Liechtenstein) and have been continuously tax-resident in France for at least two years at some point before the sale. It is also important to note that you must own the real estate directly, meaning not through a company. In addition, you must not have already benefited from the capital gains exemption when selling your former primary residence. This exemption is limited to one residence per taxpayer and to €150,000 of net taxable capital gain as of January 1, 2014 (i.e., €300,000 for a property owned in equal shares by a couple).

If you are a non-resident for tax purposes considering selling real estate in France, it is crucial to understand the capital gains tax exemption conditions that may apply to your situation. Whether or not the property was your former primary residence, different rules apply to determine the amount of the exemption. By meeting the specific criteria established by French tax legislation, you can optimize your tax obligations when selling your property. You are advised to consult a tax adviser or a specialist professional for personalized advice regarding your particular situation.

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