How does the capital gains tax work?
The sale of real estate is generally synonymous with added value. In the event that the price at which you resell your property is greater than the price at which you purchased it, you will be subject to a capital gain tax.
Real estate gains tax
In evaluating the amount you hope to recover from the sale of real estate, it is important that you take into account the taxes associated with this transaction. In terms of real estate capital gain, know that it is subject to a specific tax regime with a rate of 19%, not counting social security contributions.
Real estate tax is also impacted by the increase in the Generalized Social Contribution (CSG) that came into effect with the Social Security financing law. The rate of levies will thus go from 15.5% to 17.2%.
Depending on the situation, the tax scale is not the same. In some cases, it is possible to benefit from exemptions:
Sale of a property whose value is less than or equal to € 15,000
Sale of property acquired for more than 30 years
Sale of principal residence as well as "immediate and necessary dependences" (garages, cellars, rooms of services ...)
It is also possible to benefit from a tax exemption when selling a home that is not your main residence, under certain conditions:
Exemption possible once in your life
During the four years prior to the surrender, you did not own your principal residence
Using the transfer price within 24 months to acquire or build a home assigned to your principal residence
Calculation and deductions of capital gains tax
During the first 5 years of ownership, the capital gain is taxed in its entirety.
What tax rate?
The tax schedule now applies a rate of 19% on the amount of net capital gain. This rate is 33.33% for non-EU residents. Be aware that a gradual reduction of this taxation is done during the period of holding the capital gain: 6% for each year from 6 to 21 years of detention and 4% for the last year.
On the net capital gain, a rate of 17.2% is applied in respect of social security contributions. Like the tax rate, a progressive reduction is applied according to the duration of the detention: 1,65% for each year from 6 to 21 years, 1,60% for the 22nd year then 9% for each year up to 30 years old.
Be aware that an increase of 2 to 6% of the tax is applied for capital gains greater than 50 000 € and applied per 50 000 €.
Calculation of the real acquisition price
In order to precisely assess the net capital gain, the administration has set up a scale that allows the price of the property to be adjusted and valued. This scale takes into account two important expenses:
Expenses related to the acquisition: notary fees and agency commission. The purchase price is valued by the amount of these expenses on vouchers or a flat rate of 7.5% is applied.
Work carried out: if the works are less than 5 years old, the supporting documents are necessary for the valuation of the property. For work dating back more than 5 years, the valuation is based on the proof or a 15% fixed price is applied.
Example of calculation of real estate tax
You realize the purchase of a property on January 1, 2003 worth 500 000 €. To know the real value of the property, you can apply the valuation scale provided by the administration: 7.5% for acquisition costs (€ 37,500) and 15% for work (€ 75,000). The value used for the calculation of the capital gain will therefore be € 612,500.
On December 1st, 2018, you resell the property 750 000 €. Without the valuation of the purchase price, the capital gain is € 250,000. The gross capital gain on which the tax rate will be applied amounts to € 137,500.
From this base, you can apply the tax rate on the 15 years of ownership of the property:
6% reduction from the 6th year: 137,500 x 60% = 82,500
Net gain: 137,500 - 82,500 = € 55,000
Application of the 19% tax rate: 55,000 x 19% = € 10,450
Surcharge of 2% as net capital gain greater than € 50,000: 55,000 x 2% = € 1,100
To know your profit, you must calculate the amount of the social deductions:
Abatement retained over 10 years: 137,500 x 16.5% = € 22,687
Net gain: 137,500 - 22,687 = € 114,813
Application of the 17.2% tax rate: 114,813 x 17.2% = € 19,748
In the end, the amount of the tax calculated on the real appreciation will be: 10,450 + 1,100 + 19,748 = 31,298 €. Remember that for non-EU residents, the tax rate increases to 33.33%.
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