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THE LENGTH OF OWNERSHIP WOULD BE AN IMPORTANT FACTOR French MPs have voted in favour of charging capital gains tax on the sale of – some – main homes, in a bid to prevent property prices
spiking in tourist areas and to reduce France’s deficit. The idea, put forward in an amendment by Socialist MPs, also aims to prevent ‘flipping’ properties for a profit. This refers to
owners buying a property - typically carrying out some renovations - and registering it as their main home before rapidly selling it on, thus avoiding paying capital gains tax (CGT). At
present, CGT is only payable in France on second homes. The practice is especially common in tourist areas, where property prices have risen continuously over the previous 20 years, even
during the recent property price slump. The amendment to change the taxation rules was put forward by two MPs from the Basque Country, where high housing prices are said to have priced out
locals from the property ladder. The change was approved by the Assemblée nationale’s finance committee, and now by the assembly’s full house. It will come into effect if it remains in the
final text of the 2025 finance law after further stages, notably examination by the Senate. FIVE-YEAR MINIMUM BEFORE EXEMPTIONS The law change would see CGT levied on sales of properties
that have been owned as a main residence for less than five years. However, if the property is being sold in order to finance the purchase of another main residence, CGT will still not
apply, the amendment states. There will also be exemptions for cases when a property is sold due to death, movement into a care home, separation from a partner, or other professional
situations. The amendment – which can be read here – does not mention a change in CGT rates. If the amendment is implemented, the tax rates will be the same as for second homes: 19%, and
with an additional tax on ‘large capital gains’ (at rising rates from 2% to 6%) levied on the part of any gain that exceeds €50,000. Social charges are also levied on capital gains at
17.2%, but are reduced to 7.5% for s1-holders whose healthcare is paid for by an EU/EEA country or the UK. You can read more about how CGT is currently levied and its rates in our article
below. Read more: Capital gains tax in France: How it works
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