Capital gains on real estate
This involves disposals of real estate assets for valuable consideration (in contrast to gifts / inheritances), arising from:
- Contributions to companies (subject to exceptions)
- Compulsory purchase (with particular rules)
Relating to real estate that are:
- constructed or not yet consttructed;
- located in France (impact of tax Treaties);
- shares in companies dealing mainly in real estate that are not subject to CT, where:
- - real estate assets represent over 50% of the total actual value of the assets,
- - during the 3 years prior to disposal (on a cumulative basis, except for companies that have existed for less than 3 years),
- - on the basis of actual values, and
- - without taking account of real estate assets assigned to business activities (excluding stock): e.g. hotels.
Shares in companies subject to CT are excluded from the scheme governing capital gains on real estate and are subject to the regime of capital gains on securities.
- Disposals of main residences are exempt from tax on capital gains on real estate if on the date of disposal the property was the main residence of the assignor or it was vacant, provided it had been previously occupied by the assignor and put on sale for a reasonable period of time (usually one year).
- This exemption also covers adjoining properties if they are sold at the same time.
- - If the property is held through a company that is not subject to CT (SCI for example), only the share of the capital gain corresponding to the disposal of the rights of the shareholder for whom the asset is the main residence will be exempt.
- There is a second exemption intended to compensate the exemption for sales of a main residence for those who are not the owners of said residence.
- It applies:
- - to the first disposal of accommodation other than the main residence,
- - by a person who was not the owner of his/her main residence for the four years preceding the disposal,
- - provided that the share of the price benefiting from such exemption is used to acquire a main residence within a period of 24 months.
- An exemption is also available in the event of compulsory purchase subject to at least 90% of the price being reinvested in the acquisition of real estate. This device requires an actual compulsory purchase or at least an amicable agreement with the relevant authority concluded following the declaration of public utility.
- There are other minor exemptions not cited here.
The regime governing capital gains on real estate only applies to capital gains realised on a private basis. The FTA can therefore refuse its application if it believes the taxpayer is disposing of properties habitually or speculatively, which implies the realisation of several operations with speculative intent (acquisition for resale).
ðThis risk particularly affects property professionals who also conduct private real estate operations.