Selling French Property – associated costs/expenses
By Sue Busby, France Legal
When selling your French property, it is necessary to use a French notaire. Only notaires are able to carry out 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 if the property has a heating system
Sewage disposal arrangements report – if the property is not on mains drainage.
Habitable surface area measurement – if selling an apartment
Dry rot – if the property is in an area at risk
Radon – from 1st July 2017, if the property is in an area where there is likely to be a risk
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 is completed as long as the time lag is not ‘unreasonable’.
If the property is not your main home when you sell it, then tax on plus values may be payable. The basic rate of plus values for residents and non-residents is currently 34.5% on the difference between the purchase and selling price. This higher rate includes a social tax that previously did not apply to non-residents. If resident outside France, you will be required to provide proof of your place of residence at the time of the sale in the form of a declaration from the Inland Revenue, to avoid a higher rate of tax payable by non-EU residents.
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. 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 evidence of payment is also needed, usually in the form of bank statements.
There is an exoneration from plus-value for the first sale of a dwelling if the seller has not owned his principal residence directly or indirectly in the last four years and that the money is used within 24 months to buy a property that will be his primary residence. The exoneration can be total or partial depending on the amount of money used for the next purchase. See France Legal article on capital gains tax for more detail.
VAT – new law – Previously, 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%)
© France Legal 2016