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Capital gains and wealth tax in France: notaires give special update
Last Thursday, the Chambre des Notaires in held a special meeting open to the public to discuss the recent changes to the wealth and capital gains tax laws implemented by President Hollande. Our managing partner, Kerstin Bachmann, was there in person to take notes.
Here are the key points from the meeting:
- The Chambre des Notaires confirmed all points we have previously covered in blog posts regarding the wealth tax and capital gains tax. The wealth tax applies to persons with assets over 1.3 M€. For French residents, the asset calculation is based on worldwide assets; for non-residents, only on assets located in France.
- The fiscal law passed in August requires all property sellers to pay 15.5% social charges on the capital gains realized on the sale. Previously, only French resident sellers were subject to that charge. The applicable rates equalized the tax treatment between French and other EU residents (base rate of 34.5%), but kicked non-EU residents up to nearly 49%, previously at 33.33%. The notaires believe that, because the rates were different before, there is no unlawful discrimination against non-EU residents; our experts disagree.
- The “exceptional contribution” law that raises the wealth tax payable in 2012 was simply a way to amend the tax for 2012 retroactively, which is normally not possible to do. This can and probably will be disputed in court. However that turns out, be prepared for this change to be made permanent in the fiscal law for 2013. The proposed new law is expected to be released on September 24th.
- No substantial additional tax changes are expected for 2013. The September 24th law will likely be more administrative than substantive.
- The government has lost significant revenue from the decrease in real estate transactions over the last year. The Chambre des Notaires believes the government should and will take action to animate the market. One of the measures currently under discussion is to bring the capital gains reduction schedule for 2nd homes back to 22 years from its current timeline of 30 years.
- Primary residences remain entirely exempt from capital gains tax.
- The key to good value in your next property investment remain timing and purchase structure.
If you have questions about the new tax laws or would like to discuss how your property investment could be affected, send us an email or give us a call. We would be more than happy to discuss it further with you.