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French government considers new proposals for capital gains tax

Following opposition from its own MP’s, the French government has agreed to consider new proposals for changes to the capital gains tax regime.

The original plan was to significantly reduce the amount of relief available, but the new proposals retain a 100% relief but double the qualifying period.

At the moment, if you sell a second home within five years of purchase, you will be liable to CGT at a rate of 32.5 %.  During years five to fifteen of ownership, you gain a 10% reduction on the tax, meaning that after fifteen years, there will be no CGT to pay.

The new proposals double the qualifying period to thirty years. 

• 2% abatement for years five to fifteen
• 3% abatement for years sixteen to twenty five
• 10% abatement for years twenty five to thirty

The rule would apply to transactions completed after 1 February 2012 and not earlier as previously feared.

Considering the hefty level of CGT proposed, sellers who have not owned the property for at least twenty five years may be much better off reducing the price of the house in order to secure a sale before the rules change.  Something to seriously consider and discuss with your immobillier / financial advisor.