by Sue Busby, France Legal
When selling your French property, it is necessary to use a French notaire. Only notaires are able to effect the transfer of property from one party to another. The good news for the seller is that the purchaser is responsible for the notaire’s fees. However there are a few other costs that may be incurred by the seller.
Agents fees are typically 5 to 10% of the selling price and may be paid by the seller or the purchaser depending on the custom in the area and what is negotiated between the seller, agent and purchaser.
The seller is responsible for providing various technical reports to the purchaser as follows:
Termites – if the property is in an area affected which includes most of the warmer parts France.
Asbestos – if the property was built before 1 July 1997
Lead – if the property was built before 1 January 1949
Gas and electricity – if the installations in the property are more than 15 years old
Major natural and man-made risks such as flooding, avalanches, land movement etc if there is a plan to prevent such risks in the area.
Energy performance report
Sewage disposal arrangements report – if the property is not on mains drainage. This comes into force first of January 2013 although in some areas the local authority insists on providing this now.
Depending on which of the above apply to your particular property, you would need to budget a few hundred euros for the surveys required.
French capital gains tax (plus values) – if the property is your main residence, then you are exempt from capital gains tax on the sale. The simple rule is that you should be resident in the property at the time of sale which means when the initial contract or compromis de vente is signed. Once a sale has been agreed, it is possible to leave the property and move somewhere else before the sale on the French property completed as long as the time lag is not ‘ unreasonable’.
If the property is not your main home when you sell it, then plus values may be payable. The basic rate of plus values for non-residents is currently 16% on the difference between the purchase and selling price. For those who are resident in France and who are selling a property that is not their main residence, the rate is 28%. This higher rate includes a social tax that does not apply to non-residents. You will be required to provide proof that you were residents outside France at the time of the sale in the form of a declaration from the Inland Revenue to that effect.
Allowances are made for the costs incurred at the time of purchase such as notaire’s and agent’s fees. You can also offset the costs associated with the sale such as the cost of the survey reports mentioned above. There is a general allowance of €1000 for each seller so €2000 is allowed for joint owners, even if they are married. You can also offset the cost of works which could be described as construction, reconstruction or improvements that amount to ‘ a new element of comfort’ such as a new bathroom. The cost of renovating an existing bathroom or kitchen would not count. The tax authority will only make allowances if proper VAT invoices from a French registered builders are provided and very often evidence of payment is also needed.
After allowances, the plus values liability is then reduced by 10% a year after the fifth year of ownership so that after 15 years of ownership, no capital gains tax is due.
Fiscal representation – if any plus values is due and the selling price of the property is over €150,000, then you will be required to appoint a fiscal representative in France. The cost of doing this is approximately 1% of the sale price.
France Legal has its own fiscal representative in France who provides this service at favourable rates to our clients.
VAT – new law – up until very recently, VAT was payable on sale of property less than five years old and a reduced rate of stamp duty (0,715%) was payable by the purchaser. However there has been an overhaul of VAT and one of the results is that VAT is no longer payable on the sale of property less than five years old except for those bought ‘off plan’ and the purchaser now pays the normal rate of stamp duty (5.09%)
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