Thinking of selling up in France and moving on? Brexit has thrown up many issues that were inconceivable just three years ago
Brexit has thrown up many issues that were inconceivable just three years ago. Many expats who have settled in France, having bought their main home there, are now giving serious consideration to alternatives to their dream of a settled life and retirement in France. Some are concerned for the future funding of their healthcare in retirement and others just feel the “pull” of a life in another country or, indeed, back to the UK.
This dilemma then begs the question what taxes will be payable if the main home in France takes a long time to sell but the owners have moved back to the UK or on to another EU location whilst UK citizens are still able to benefit under the EU’s freedom of movement provisions.
From January 2019 there are some helpful provisions in French tax law that will apply if an individual(s) ceases to be tax resident in France and becomes tax resident in another EU country or in a jurisdiction with which France has concluded a treaty for the avoidance of tax evasion and mutual co-operation on fraud, recovery of unpaid tax etc. Note: the exchange of information and mutual co-operation treaties are not the same as the double tax treaties which cover income tax, capital gains tax etc. (eg UK/France Double Tax Agreement).
Fortunately, for those heading back to Blighty, the UK does have such an agreement with France, so, on becoming UK tax resident, the January 2019 law will apply. Essentially, if all conditions are fulfilled, then the gain on the sale of the French former main residence will be exempt from tax in France.
The conditions are:
- The acte authentique de cession for the former main residence must be dated no later than
31 December of the year following the cessation of tax residence in France and establishment of tax residence in the other jurisdiction.
- The former main residence in France must not be let nor even occupied on a rent-free basis by a third party in the period from the owner’s transfer of tax residence from France until the sale.
- The property being sold must have been the main residence of the vendor at the date of cessation of tax residence in France. If, on that date, the property was let, occupied on a rent-free basis by a third-party or, indeed, vacant at that date, the exemption will not apply.
All outbuildings of the former main residence will also be exempt from French capital gains tax provided their sale is at the same time as the sale of the main residence. Even if these outbuildings are sold to a different purchaser, then this would not preclude the application of the exemption. The Tax Administration’s view is that the condition for simultaneous disposal will have been satisfied if the sale of the outbuildings occurs within the normal timeframe.
The exemption is available regardless of the amount of the sale price, the gross capital gain, or even if the sale results in the demolition of the building to allow for new constructions. However, if the taxpayer is already benefitting from the exemption of up to €150.000 on the sale of a French rental property, then this exemption on the sale of their former main residence in France will not be available to them.
If you require any further advice, then please contact the team at PetersonSims on [email protected]