Any UK citizens looking to sell their second home in France will see their capital gains tax (CGT) levy significantly increase once the Brexit transition period comes to an end on 31 December 2020.
People who sell property in France are usually subject to both CGT and social charges. The latter reduces from to 7.5% from 17.2% if the seller is an EU or EEA citizen covered from their country’s healthcare system.
This means that sellers only needs to pay a total of 26.5% in tax, with CGT and social charges combined, at the point of sale.
But the exemption will not be available to UK citizens from 1 January 2021, leaving them to foot a total tax bill of 36.2% on the profit they make from their home.
Joanne Leach, senior client director for France at Strabens Hall, told International Adviser: “It is likely that, after the withdrawal agreement ends, social charges levied on gains will rise from 7.5% to 17.2% for British residents who sell their second residence in France.”
Beware of exemptions
But she advised that the best way to go about it is to always seek financial and tax advice, as there are plenty exemptions available to sellers.
“For example, if you’ve held the property for more than 30 years you are not liable to social charges or CGT in France on the gain,” Leach added. “Other clients, who have large gains on their holiday homes in France and had planned to sell anyway sometime in the future, have looked to move to France before the end of this year, making France their primary residence, allowing them to sell their house without any CGT using the main residence exemption.
“There are rules surrounding this, so always take advice. France is not famed for its bureaucracy for no reason and it’s important to have a full review of your financial position before you move here.”
But CGT and social charges are not the only levies Brits need to worry about.
Leach said they need to appoint a “fiscal tax representative”, which charges around 1% of the sale price.
“Currently, as a member of the EU, we are not required by law to appoint one, but once the UK leaves the EU, [Brits] will be obliged to make a capital gains declaration supported by a tax representative accredited by the French Tax Authority,” she added.
“The Société Accréditée de Représentation Fiscale (SARF) [the French accredited society for fiscal representation] is one such representative which guarantees the accuracy of the calculation and the payment of the tax, and will deal with any litigation which may arise.
“Again, there are exemptions; for example, if you have owned the property for more than 30 years or if the total sale price is below €150,000 (£135,510, $181,201).”