Sale of real estate located in France by a Swiss resident

In France, in the event of the sale of real estate, the seller is subject to a tax on the capital gain on the real estate. This tax is based on the difference between the acquisition value and the resale value (capital gain).

There is an exemption in the case of sale of the principal residence, but we will disregard this since a Swiss resident has, by definition, his principal residence in Switzerland and not in France.

Here is a quick overview of the main differences and similarities between a sale of real estate by a Swiss resident and a French resident:

1. Differences

Tax rate: social security contributions of a different amount

In the event of a sale, the capital gain on the real estate will be taxable as follows:

A. Tax:

Rate: 19%

No difference for French or Swiss residents.

B. Social security contributions:

NB: Following legislative and judicial developments concerning the applicability of social security contributions for Swiss residents, the French law was amended as of 1 January 2019 to reduce the rate of social security contributions for Swiss residents.

However, at the time of writing, uncertainties remain as to the extent of the reduction.

Rate:
17.2% for French residents
7.5% for Swiss residents since 1 January 2019

C. An “additional tax” of up to 6% in the event of a “significant capital gain”, i.e. more than € 50,000

Tax representative

A person domiciled outside the European Union and selling a property located in France must have an accredited tax representative. This tax representative guarantees the proper payment of capital gains tax in France. In the event of misrepresentation, he will be held liable.

The tax representative must be accredited in advance by the tax authorities. It is worth noting that some specialised companies hold a permanent accreditation as tax representatives.

There are two exceptions to the requirement to appoint an accredited tax representative:

1. where the asset has been held for more than 30 years;

2. where the sale price is less than EUR 150,000.00.

It should be noted that a tax representative must be appointed even if the seller realises a capital loss.

1. Similarity

Holding period exemption: full exemption after holding for 30 years

French law provides for a reduction of the tax base according to the length of time the property has been held. This reduction is calculated in the same way for a seller resident in France or Switzerland.

This reduction is different for the “tax” part (19%) and for the “social security contributions” part (17.2%/7.5%).

Holding period	“Tax” reduction
Between 0 and 5 years	0%
6 years	6%
7 years	12%
8 years	18%
9 years	24%
10 years	30%
11 years	36%
12 years	42%
13 years	48%
14 years	54%
15 years	60%
16 years	66%
17 years	72%
18 years	78%
19 years	84%
20 years	90%
21 years	96%
22 years	100%

Holding period	“Social security contributions” reduction
Between 0 and 5 years	0%
6 years	1.65%
7 years	3.30%
8 years	4.95%
9 years	6.60%
10 years	8.25%
11 years	9.90%
12 years	11.55%
13 years	13.20%
14 years	14.85%
15 years	16.50%
16 years	18.15%
17 years	19.80%
18 years	21.45%
19 years	23.10%
20 years	24.75%
21 years	26.40%
22 years	28%
23 years	37%
24 years	46%
25 years	55%
26 years	64%
27 years	73%
28 years	82%
29 years	91%
30 years	100%

Example:

On 1 March 2019, Mr A, a Swiss resident, sells his second home in France to Mr B, a French resident (irrelevant factor), for EUR 500,000.00.

Purchase price (in the year 2000): EUR 300,000.00
Purchase and construction costs: EUR 67,500.00
Increased purchase price: EUR 367,500.00

Capital gain: Sale price (EUR 500,000.00) - Purchase price (EUR 367,500.00) = EUR 132,500.00.

Ownership period: 19 years

Mr A will have to pay the following taxes to the French tax authorities:

1. Capital gains tax (19%)

Deduction of 84% for a period of ownership of 19 years, i.e. 84% of the capital gain of EUR 132,500.00 = EUR 21,200.00.

Tax: 21,200.00 x 19% = EUR 4,028.00

2. Social security contribution tax (7.5%)

Deduction of 23.10% for an ownership period of 19 years, i.e. 23.10% of EUR 132,500.00 = EUR 101,892.50.

Tax: 101,892.50 x 7.5% = EUR 7,641.94.

Mr A will have to pay a total tax of EUR 11,669.94.