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For UK residents any capital gain will be taxable in France and in the UK.

France

Capital Gains Tax (CGT) is a tax on the gain when you sell a property.
In France, capital gains on real estate are taxable at a CGT rate of 19% plus social
charges at 7.5%. The social charges rate is increased to 17.2% if you are affiliated to
the French healthcare system when you sell real estate and this will generally be the
case if you have previously worked in France and paid French social security
contributions.
When computing the capital gain the following reliefs are available:
 The capital gain is reduced for every year of ownership after 5 years. There is
no CGT after 22 years and no social charges after 30 years.

 Instead of deducting the actual incidental costs of acquisition when calculating
the capital gains, you may deduct 7.5% of the acquisition price. This is very
helpful if the acquisition costs were not documented or are lower than the
fixed 7.5%.

 You can either deduct actual improvement costs, or, where the property has
been held for at least 5 complete years, 15% of the acquisition costs in lieu of
improvement costs (this can be used where the actual improvement costs are
lower than 15% of the acquisition costs).

 €150,000 allowance for EU and EEA nationals (subject to conditions such as
previous tax residency in France).

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If after the reliefs have been applied there is still a capital gain, then you will be liable
to French tax on the capital gain.
A progressive surcharge applies for larger capital gains, starting at 2% for capital
gains exceeding €50,000, with a maximum rate of 6% for capital gains exceeding
€250,000.

United Kingdom

In the UK real estate capital gains are generally taxed at a rate of 18% to the extent
that they do not exceed your unused basic rate band and at 28% to the extent that
they exceed the amount of the unused basic rate band. The unused basic rate band
is the amount of basic rate band remaining after your income has been taxed (up to
£37,000).
Very few reliefs are available other than deducting the incidental costs of acquisition,
improvement costs and your personal annual exemption to set against the capital
gain (£12,300 in 2022/23).

Exchange rate

When selling a foreign real estate due consideration should be given to the
exchange rates. Indeed, when calculating a capital gain, the cost of each transaction
needs to be converted into sterling at the date of each relevant transaction, such as
purchase, sale, professional fees, enhancement costs etc.
Because the capital gains must be calculated in sterling, depending on the evolution
of the exchange rates it is possible to generate a loss in local currency, but a capital
gain in sterling. So even if you have generated a capital loss in France you should
still consider the UK tax implications as it is not uncommon for French losses to be
turned into capital gains in the UK because of currency exchange variations.

Double Tax Convention

The France / UK Double Tax Convention (‘DTC’) of 19 June 2008 provides that
French CGT can be offset against the UK tax liability.

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Whilst the effect of the DTC is to avoid double taxation, you should bear in mind that
you will always pay the higher rate of the France or UK CGT. So it is often the case
that reducing your French CGT exposure increases the UK exposure and even if
your capital gain is exempt in France because of the taper relief, UK CGT may still
be payable.
Furthermore, the DTC is not applicable to social charges and no tax credit will be
available in the UK for social charges paid in France on real estate capital gains.
This means that the total tax rate can be as high as 35.5% (28% UK CGT and 7.5%
French social charges).

Tax representatives

Since Brexit, UK resident sellers must appoint a tax representative on the sale of a
property in France. The role of the tax representative is to verify that the correct
amount of tax is being paid on the transaction.
The cost of the tax representatives varies between 0.4% to 1% of the selling price of
the property and can be deducted for capital gains tax purposes.
It is worth raising CGT with the notaire before appointing them; some notaires only
work with specific tax representatives. We have considerable experience of working
with notaires and tax agents and are happy to assist.

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frenchtax@da-tax.co.uk

+44 (0) 7922 878 989