The sale of an apartment or house abroad requires compliance with a certain procedure, both legally and from a tax standpoint. For the seller, it is important to declare this transaction correctly to the tax authorities in order to avoid any future penalty.
It is important to know that this process must in principle be carried out both in the country in which the property sold is located and in the country in which you have your tax domicile, namely France (this article is intended for French tax residents).
Declaring capital gains on a property sale abroad
Even if the sale takes place in a foreign country, you should know that the gains you make on the sale of a house or apartment outside France must be declared to the tax authorities. Since your tax domicile is in France, you must in principle pay a corresponding tax in France (subject to the international tax treaties on income tax).
The gains arising from this sale must be declared using form no. 2048-IMM-SD. Known as the real estate capital gain (plus-value immobilière), it represents the amount taken into account to calculate the tax (and not the entire sale price).
Form 2048-IMM-SD guides you through the process of calculating the taxable capital gain, but our tax law firm can, if you wish, prepare these declarations.
Any capital gains tax paid abroad will generally constitute a tax credit in France. In other words, the tax paid abroad will reduce the tax due in France. In this respect, particular attention must be paid to the tax treaties, the list of which you will find here.
Documents to be attached to form 2048-IMM-SD
In principle, a certified true copy of the deed of sale, translated into French, must be attached. The translation does not have to be carried out by a sworn professional; an unofficial translation may suffice. I also recommend enclosing an explanatory letter, which your tax lawyer can prepare for you.
Tax treaties with France on income tax
Particular attention must be paid to international tax treaties.
A real estate capital gain made by an individual falls within the scope of income tax. An income tax treaty may exist between France and the State in which the property is located.
Double taxation
Where the real estate capital gain arises in a country that has not concluded a treaty, you will in principle have to complete the declaration formalities twice. Your tax will also be calculated in both countries. This is referred to as double taxation of real estate capital gains.
OECD countries are indeed entitled to tax real estate capital gains made on their territory. Sellers often wrongly believe that paying this tax in the country where the property is located is sufficient. They very often conclude that they are exempt from any tax in France. However, under the rules, this is often not the case.
As soon as your tax domicile is in France, you may also have to pay taxes in that country. It is therefore advisable to seek advice from a professional, such as a tax lawyer, to assist you with these formalities.
Calculating capital gains
The taxable capital gain is equal to the difference between the sale price and the acquisition price of the property. Where the sale concerns a property held for more than five years, the capital gain is reduced by a holding-period allowance. Certain capital gains also benefit from an exceptional allowance regardless of how long the property has been held.
The acquisition price corresponds to the price actually paid when the property was purchased as stipulated in the deed, increased by the charges and indemnities stipulated in favour of the seller (if concealment of part of the price is established, the price stated in the deed must be increased by the amount concealed).
The acquisition price is increased by a flat-rate 7.5% to take account of acquisition costs. However, the seller may choose to replace this flat rate with the actual amount of the following costs, duly substantiated: contract costs (in particular notary's fees and intermediaries' commissions), registration duties or VAT.
Expenditure on works
Expenditure on construction, reconstruction, extension and improvement may be added to the acquisition price at its actual amount, with the exception of:
- expenditure in the nature of tenant-type repairs: painting, wallpaper, carpets… (unless such expenditure is inseparable from the construction, reconstruction, extension or improvement works:
- and expenditure that has already been taken into account in calculating income tax (overall income or category income) or that has been included in the basis of a tax reduction or tax credit.
Holding-period allowance
Where the property sold has been held for more than five years, the capital gain is reduced by a holding-period allowance, the amount of which differs depending on whether income tax or social security contributions are being calculated.
a. To determine the amount subject to income tax, the allowance is:
- 6% for each year of holding beyond the fifth and up to the twenty-first;
- 4% for the twenty-second year of holding.
Exemption from income tax is thus obtained after twenty-two years of holding. For example, a capital gain made on 1 June 2019 is exempt if the property was acquired before 1 June 1997.
b. To determine the amount subject to social security contributions (prélèvements sociaux), the allowance is:
- 1.65% for each year of holding beyond the fifth and up to the twenty-first;
- 1.60% for the twenty-second year of holding;
- 9% for each year beyond the twenty-second.
Exemption from social security contributions is thus obtained after thirty years of holding and, between twenty-three and thirty years of holding, capital gains are subject only to social security contributions.
This allowance applies regardless of the nature of the property (built or unbuilt). It is calculated per twelve-month period, disregarding fractions of a year. The holding period runs from the date of acquisition (that is, in principle, the date of the notarial deed for purchases and gifts, and the date of death for property received by inheritance) until the date of sale, which constitutes the chargeable event for taxation.
REAL ESTATE CAPITAL GAINS CALCULATION SIMULATOR
Summary table of applicable allowances
| Holding period of the property |
Income tax (19%) |
Social security contributions (17.2%) |
Holding period of the property |
Income tax (19%) |
Social security contributions (17.2%) |
|---|---|---|---|---|---|
|
Allowance rate |
Allowance rate |
Allowance rate |
Allowance rate |
||
| Less than 6 years | No allowance | No allowance | Between 18 and 19 years | 78% | 21.45% |
| Between 6 and 7 years | 6% | 1.65% | 19 and 20 years | 84% | 23.10% |
| 7 and 8 years | 12% | 3.30% | 20 and 21 years | 90% | 24.75% |
| 8 and 9 years | 18% | 4.95% | 21 and 22 years | 96% | 26.40% |
| 9 and 10 years | 24% | 6.60% | 22 and 23 years | Exempt | 28% |
| 10 and 11 years | 30% | 8.25% | 23 and 24 years | Exempt | 37% |
| 11 and 12 years | 36% | 9.90% | 24 and 25 years | Exempt | 46% |
| 12 and 13 years | 42% | 11.55% | 25 and 26 years | Exempt | 55% |
| 13 and 14 years | 48% | 13.20% | 26 and 27 years | Exempt | 64% |
| 14 and 15 years | 54% | 14.85% | 27 and 28 years | Exempt | 73% |
| 15 and 16 years | 60% | 16.50% | 28 and 29 years | Exempt | 82% |
| 16 and 17 years | 66% | 18.15% | 29 and 30 years | Exempt | 91% |
| 17 and 18 years | 72% | 19.80% | More than 30 years | Exempt | Exempt |
|
Sales benefiting from the exceptional allowance of 70% or 85% (1) |
||||
|---|---|---|---|---|
|
Holding period of the property |
Income tax (19%) |
Social security contributions (17.2%) |
||
|
Overall allowance rate (2) |
Overall allowance rate (2) |
|||
|
Exceptional allowance (70%) |
Increased exceptional allowance (85%) |
Exceptional allowance (70%) |
Increased exceptional allowance (85%) |
|
| Less than 6 years |
70% | 85% | 70% | 85% |
| Between 6 and 7 years |
71.8% | 85.9% | 70.495% | 85.2475% |
| 7 and 8 years | 73.6% | 86.8% | 70.99% | 85.495% |
| 8 and 9 years | 75.4% | 87.7% | 71.485% | 85.7425% |
| 9 and 10 years | 77.2% | 88.6% | 71.98% | 85.99% |
| 10 and 11 years | 79% | 89.5% | 72.475% | 86.2375% |
| 11 and 12 years | 80.8% | 90.4% | 72.97% | 86.485% |
| 12 and 13 years | 82.6% | 91.3% | 73.465% | 86.7325% |
| 13 and 14 years | 84.4% | 92.2% | 73.96% | 86.98% |
| 14 and 15 years | 86.2% | 93.1% | 74.455% | 87.2275% |
| 15 and 16 years | 88% | 94% | 74.95% | 87.475% |
| 16 and 17 years | 89.8% | 94.9% | 75.445% | 87.7225% |
| 17 and 18 years | 91.6% | 95.8% | 75.94% | 87.97% |
| 18 and 19 years | 93.4% | 96.7% | 76.435% | 88.2175% |
| 19 and 20 years | 95.2% | 97.6% | 76.93% | 88.465% |
| 20 and 21 years | 97% | 98.5% | 77.425% | 88.7125% |
| 21 and 22 years | 98.8% | 99.4% | 77.92% | 88.96% |
| 22 and 23 years | Exempt | Exempt | 78.4% | 89.2% |
| 23 and 24 years | Exempt | Exempt | 81.1% | 90.55% |
| 24 and 25 years | Exempt | Exempt | 83.8% | 91.9% |
| 25 and 26 years | Exempt | Exempt | 86.5% | 93.25% |
| 26 and 27 years | Exempt | Exempt | 89.2% | 94.6% |
| 27 and 28 years | Exempt | Exempt | 91.9% | 95.95% |
| 28 and 29 years | Exempt | Exempt | 94.6% | 97.3% |
| 29 and 30 years | Exempt | Exempt | 97.3% | 98.65% |
| More than 30 years | Exempt | Exempt | Exempt | Exempt |
(1)Scheme now expired. Allowance applicable to sales of real estate or building land located in zones A or A bis, preceded by a sale undertaking (promesse de vente) with a certain date between 1-1-2018 and 31-12-2020, the sale having to take place no later than 31-12 of the second following year, subject to conditions relating to the construction of multi-unit housing. (2) Holding-period allowance + temporary 70% allowance, increased to 85% if the purchaser undertakes to build social or intermediate housing for at least half of the development. |
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Taxation arrangements
The income tax rate is 19%. To this are added social security contributions at the rate of 17.2% (for 2019) and, where applicable, the surtax on capital gains exceeding €50,000.
Total rate = 36.2% (for 2019) + any surtax
The capital gains declaration is made on form no. 2048-IMM (property other than building land) or no. 2048-TAB (building land), available at www.impots.gouv.fr. It is signed by the seller or by their representative (the power of attorney must then be included in the deed or attached to the declaration). It must normally be filed in a single copy, together with payment of the tax, within the month following the sale; for a property located abroad, it is filed with the departmental registration office (service départemental de l'enregistrement) responsible for the seller. Our tax law firm can assist you with this process.
For a property located in France, it is generally the notary in charge of the sale who carries out these operations and declarations; for a property located abroad, it is in principle up to the seller to do so and to pay the tax due themselves.
Where the capital gain is exempt (in particular as a result of the holding-period allowance) or where the transaction results in a capital loss, no declaration needs to be filed.
Our tax law firm can assist you.
