French property: the social charges 15.5% on incomes and capital gains coming to an end for non-French residents?

Since 2012, non-French residents selling their French properties have to pay 15.5% on gains generated in addition to the capital gains tax of 19%. These social charges were also taxed on rents perceived from the French property.

This tax addition was highly criticised by the non-French residents as being discriminatory. Many concerned people were questioning the reasons as to why they should pay social charges in France despite not living there and not perceiving any French social benefits from it.

A recent case is being heard at the European Court of Justice regarding the taxation of French social charges on non-French residents. On the 21st October 2014, the Advocate General has given his opinion that the French tax law (“article 29 de la loi de finances rectificative pour 2012”) was against the European Regulation no 1408/71 whose purpose is to ensure the freedom of workers within EU.

It is likely that the European court will rule that France’s law imposing social charges on non-French resident is illegal. As a consequence, the French government will have to amend his tax law in accordance with the European court ruling.

Can non-French residents who paid social charges make a claim?

Yes they can! There is however a time limit.

According to French tax procedural rules, the time for claiming taxes runs from one calendar year from the end of the year the taxes were paid.

Any non-French resident who sold his property in 2013 should take urgent advice and issue a claim to the French Tax Revenue before 31st December 2014. For those who sold during 2014, they should also act very quickly as the European Court decision is expected imminently and will not have a retroactive effect.

Francophile legal Consulting can assist you with international property matters. For more information on this topic, please do not hesitate to contact Loic Raboteau, managing director by completing the form below.

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A little more about FRANCOphile Legal Consulting Ltd.

The company was created in response to the need of legal experts for international private clients and businesses. People are no longer confined within their own country boundaries to work, create a business or purchase assets. National, international laws and new technology have enabled people and businesses to move and expand internationally, creating a demand to resolve cross-border issues.

We are a London-based legal consultancy company dedicated to addressing our clients’ international needs. Whether you are a private individual moving or investing in a foreign country, an entrepreneur, or a business willing to expand internationally, FRANCOphile Legal Consulting Ltd will cater your specific requirements and will look after your interests in the short and long term.

Benefiting from an extensive network of international lawyers, solicitors, accountants and financial advisors based in London and in several jurisdictions, FRANCOphile Legal Consulting Ltd is able to handle your interests in different countries around the world.

Our approach and solutions are tailored to our clients’ needs. We believe that our clients are unique and warrant distinctive service.

Our international coverage includes France, London, Tunisia, Morocco, Egypt and Mauritius. If you would like to know more about us then fill out the contact form above and we will be right back to you.

Many owners of a property in France will recall the various documents that were produced as part of the purchase process. The contracts, together with their annexes, will have been substantial.

Following recent legislation known as the Loi Alur, even more information is to be produced in advance of an apartment sale. This has left some agents, notaires and sellers feeling a little exasperated. The seller of an apartment is now obliged to produce extra information, including the co-ownership agreement, the latest accounts, work carried out by the managing agent, and Minutes of the AGM.

In practice, when instructed on an apartment purchase, we have always looked to seek this information, not least because the contract will often state that it has been produced to the buyer.

The rationale, then, of the law is to ensure that this information is indeed produced, and this is reasonable. A buyer should review previous AGM Minutes and co-ownership accounts: they could reveal problems such as future works that may be necessary, litigation and so on.

The problem though, especially prevalent with older buildings, is that many different notaires could have registered small amendments to the co-ownership papers, all of which will have to be obtained, increasing time and cost. Most of those amendments will probably have no relevance to the particular apartment.

This is likely, then, to increase the complexity of the process, without perhaps much relevance on a transaction. As to how this will develop, only time will tell.

For individual advice, please contact Matthew Cameron at Ashton KCJ here...

A bientôt!

Matthew Cameron

Head of French Legal Services.

We at Cle France - The French Property Network are proud to work in partnership with Ashton KCJ - Legal services. If we think our clients need further legal advice or have a specific legal question that needs solicitor involvement when buying or selling a property in France we can recommend Matthew Cameron and his team for expert advice.

Types of Certificat d'Urbanisme

I bet you did not know there are actually two types of certificat d’urbanisme ?

Certificat d’urbanisme d'information -

This merely states whether or not the land is zoned for building, together with information on public utilities and local taxes, and any rights of pre-emption that might exist on the site to the benefit of the commune.

If you have purchased land for building or redevelopment then you should have been provided with this document by the notaire at the time of purchase.

A certificat d'information does not state what permitted development may take place on the site, which is only elaborated by the more detailed certificate outlined below.

As a result, the certificat d'information is of limited value, particularly where there is any doubt about the status of the land, or what can be build upon it.

Certificat d’urbanisme opérationnel -

This sets out the rules on density, location and size of building that may be permitted, as well as any architectural rules that may apply and information on utilities and the requirements of public utility providors.

The certificate is not always highly specific where there are few planning constraints, as is often the case in rural areas.

If you have a specific project then you can provide basic details to the planning authority and, provided its complies with the planning rules, an operational planning certificate can be issued. You then have a fairly strong guarantee that a later planning application on the same terms will be approved.

A certificat d'urbanisme is valid for eighteen months, which can be extended for a year, provided the planning rules and services requirements have not changed. To extend the certificate you need to make application at least two months before the expiry of the current certificate.

Contact Us for more information on this issue and many more questions you may have.

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Blog submitted by: David at The French Property Network - Cle France.

Anyone who buys a property in France will know that the first contract will have to have attached to it various inspection reports, known as diagnostics. The reports are provided for information, and it is important to understand exactly what they cover, what they mean, and what they do not tell you.

The nature of the searches to be carried out depends on the age, location and type of the property. If you are buying an apartment, there will be a measurement to establish the internal surface area. In many areas of the south and west of France there will be a termite inspection. Built before 1948 the property will probably be subjected to a check to establish if there is any lead-based paint.  

Built before 1997 and the inspector will look to see if there is any asbestos in the property. The drainage will also be checked. If there is no mains drainage, the system will be tested to ensure it not only functions correctly but it complies with current regulatory standards.

In addition to these inspections relating to the property itself, information must be provided about the physical status of the region - whether there is any known history or future risk of matters such as flood, landslide, avalanche, forest fire and so on. This report will give a picture of the whole area - and do not be surprised if there is a history of avalanche in an alpine resort. The two points to pick up from this are that it is important to establish in the contract that no such incidents have affected the property to be bought, and that there may be limitations on building because of any risks.

These inspections can however be somewhat limited. The termite inspection, for example, would only declare active infestation if the inspector saw them, but without actually breaking the surface of the wood. This means that the inspector will not declare that the property is free of termites: rather that he could not see any evidence of their presence on the day. Furthermore, the inspector would not declare if a previous infestation had left the woodwork so damaged it was about to cave in.

The result is that the inspections are strictly limited. They do not replace the benefits that can be gained from commissioning an independent survey – that could also be a good negotiating tool for the price.

For individual advice, please contact Matthew Cameron here.

We at Cle France - The French Property Network are proud to work in partnership with Ashton KCJ - Legal services. If we think our clients need further legal advice or have a specific legal question that needs solicitor involvement when buying or selling a property in France we can recommend Matthew Cameron and his team for expert advice.

The French finance bills for 2013 and 2014 have brought some changes in rates that may have an impact on the market. These measures have been thought out by the French socialist government as a way to improve French public finances and they affect residents and non-residents alike. They also affect purchases as they mean a rise in Notaire’s fees.

Your French Property Purchase:

Starting from the 1 January 2014 all the TVA rates have gone up. This means that current expenses will rise as the 7% reduced rate for restaurants, construction, and ebooks, has risen to 10%. However the 5.5% rate, for food, hotels and entertaining has fallen down to 5%.  

The main measure of interest for a property purchaser is the 19.6% standard rate which has gone up to 20%. Whilst this means that the rate is the same as the VAT in the UK, this entails a slight raise in the Notaire’s fees for all property transactions.

However one must keep in mind that the France and UK rates are not the highest as Spain and Belgium for instance have increased their rates to 21 %.

While this slight raise could have been regarded as not having dramatic consequences, another provision of the finance bill is more severe with regard to Notaires’ fees. These consist mainly in taxes other than TVA to the benefit of “Départements” or towns. The Notaire’s actual charge represents approximately 1% while the total fees on a purchase are usually about 7% to 8% of the price.

Starting from 1 March 2014  Départements have been authorised to raise their allocation up to a maximum of 0.70%. This means that the Notaire’s fees will increase accordingly.

Some Départements have already said that they will not apply the rise on 1st March 2014, whereas others have said they will apply the raise. As of now this list is not final. Given this uncertainty the Notaire will not have any other choice than announcing to clients higher fees by way of estimate that may be revised after the sale is completed. This is simply reinforcing to the old Notaire’s habit of announcing a provision.

When Selling Your French Property:

The main area of focus here is capital gains tax. A new regulation has made non-residents liable to pay social charges. A complete relief is achieved after 22 years of ownership with regard to capital gains tax itself, but after 30 years for the social charges.

The relief comes in gradually. This means that any seller should pay attention to the anniversary date when he bought the property, as this governs the total amount of indexation relief that is possible. The new capital gains tax calculation has become very complex and it is highly advisable to seek professional advice in this respect.

In a midst of all these measures there is a silver lining as from 1 January 2014, a non-French resident national of an EU Member State, Norway or Iceland who sells his property in France may be exempt from capital gains tax on the sale of a French property.

The exemption focuses on disposals:

- After December 31 of the fifth year following transfer of tax residence outside France;

- Without time limit, if the seller has free disposition of the property (that is to say that the property is not rented) at least since January 1 of the year preceding the transfer.

The exemption is limited to a single assignment and certain other provisos.

For individual advice, please contact Jean-Paul Vovor here.

We at Cle France - The French Property Network are proud to work in partnership with Ashton KCJ - Legal services. If we think our clients need further legal advice or have a specific legal question that needs solicitor involvement when buying or selling a property in France we can recommend Matthew Cameron and his team for expert advice.