Wondering How Does Capital Gains Tax (CGT) Work in France? Capital gains tax (CGT) in France is an important consideration for both residents and non-residents. French capital gains tax is the main subject of this article, focusing on how it applies to property sales and other assets. Whether you are selling property, shares, or other assets, understanding how capital gains are taxed in France can help you plan more efficiently and avoid unnecessary costs. Non-residents may have different tax obligations and, in some cases, may need to appoint a tax representative to ensure compliance and pay tax when selling property in France. In this guide, we break down the CGT system, including the key rates, exemptions, and practical considerations for expats.
What Is Capital Gains Tax in France?
Capital gains tax in France applies when you sell an asset for more than you originally paid for it. This tax is also referred to as capital gain tax, and the profit made from the sale is known as a capital gain. The gain is calculated as the difference between the sale price and the purchase price of the asset. The most common types of assets subject to CGT include real estate, shares, and investment portfolios.
Real estate capital gains are a major source of tax liability for individuals selling property in France. Gains on real estate are subject to specific tax rules and rates, which may vary depending on factors such as residency status and applicable exemptions.
What Is the 30 Percent Tax Rule in France?
The standard flat tax on capital gains for financial assets in France is 30 percent, often referred to as the “Prélèvement Forfaitaire Unique” (PFU). This includes:
- 12.8 percent income tax
- 17.2 percent social charges
The term social levies is also commonly used to describe the social charges component of the tax.
This combined rate of 30 percent covers both income tax and social charges. Note that tax rates may vary for different types of assets or under specific conditions.
This flat rate applies by default, but individuals can opt for progressive taxation under certain conditions.
How Is Property Treated?
Do You Pay Capital Gains Tax on a Second Home in France?
Yes. If the property is not your main residence, it is considered a second home (also known as a secondary residence) and therefore subject to capital gains tax. However, there are allowances based on the length of ownership.
Properties held for more than five years may benefit from allowance based reductions, with the taxable gain decreasing over time depending on how long you have owned the property. In addition, eligible costs such as renovation work and notary fees can also be deducted from the taxable gain when selling a second home.
Are There Exemptions?
Your primary residence (also referred to as your principal residence or principal home) is exempt from CGT when sold, provided it has been your main home for a reasonable period prior to the sale. For second homes, the CGT liability can be reduced over time:
- Fully exempt from income tax after 22 years of ownership
- Full exemption from social charges after 30 years of ownership
If you have relocated and are selling your former home (previous main residence), specific tax implications and exemption rules may apply, particularly for those who have changed their country of residence.
The exemption is determined by the year of ownership, and certain categories of sellers may be exempted from capital gains tax under specific exemption rules.
This applies only to French tax residents.
Special Situations
Do You Pay Capital Gains Tax on Inherited Property in France?
No capital gains tax is due at the point of inheritance. However, if the inherited property is later sold, CGT will apply based on the property’s market value at the time of inheritance. This becomes your new acquisition value for tax purposes.
For shares acquired through inheritance, the acquisition date is considered for tax purposes, and the years preceding the inheritance may affect the calculation of capital gains.
What Is the Capital Gains Inclusion Rate in France?
Unlike countries like Canada, France does not have an “inclusion rate.” Instead, the entire gain is subject to the flat 30 percent tax unless reduced by exemptions or the length of ownership.
Capital gains are assessed based on the net gain realized during the relevant tax year, with tax liabilities determined according to the taxpayer’s situation as of 1 January of that year. The tax authorities are responsible for assessing and collecting capital gains tax in France.
Does France Tax Unrealised Gains?
No. France only taxes realised gains, which means tax is only due once the asset is sold. Unrealised gains, such as increases in the market value of shares or property still owned, are not taxed.
Unrealised gains remain tax free until the asset is sold.
Can You Use Losses to Offset Capital Gains?
Yes. Capital losses can be used to offset capital gains on similar assets. For example, a loss on a share sale can reduce the taxable gain from another share sale. However, losses cannot offset income from other sources.
In some cases, offsetting capital losses against gains can help you achieve a partial or total tax exemption on your capital gains.
Social Charges on Property Sales
How Much Are Social Charges When Selling a House in France?
Social charges apply at 17.2 percent on property sales where CGT is due. There are exemptions if the seller is affiliated with another EU or EEA country’s social security system, or if they are covered by a bilateral agreement with the French social security system.
What About Different Tax Bands?
What Is the 20 Percent Tax in France?
This typically refers to the minimum flat tax rate for non resident individuals, including UK resident sellers, selling property in France. It applies only to the income tax portion of CGT, with social charges added on top.
What Is the 75 Percent Tax in France?
Often misunderstood, this was a temporary “millionaire tax” introduced in 2013 and has since been phased out. It does not apply to CGT today.
What Is the Millionaire Tax in France?
This refers to past tax policies where high earners paid a temporary extra charge. It no longer exists, but higher earners may still face solidarity tax or higher income tax brackets under the progressive system.
Note that the supplementary tax on large gains does not apply to building land.
Expats and Retirees
Is Retiring to France Taxable?
While there is no specific retirement tax, retirees living in France may be subject to local taxes, including CGT, depending on their residency and asset structure. French tax residents must declare global income and gains.
New residents may be exempt from certain taxes on foreign assets for the first five years, with tax obligations changing after the fifth year.
What Are the Tax Laws for Expats in France?
Expats living in France for more than 183 days per year are generally considered French tax residents and taxed on their worldwide income and capital gains. Tax treaties, including any tax treaty signed between France and the UK, can affect tax obligations by providing relief or exemptions from double taxation. Additionally, UK rules may apply to UK residents with assets in France, and the provisions of a tax treaty can influence how capital gains and other taxes are assessed for cross-border situations. For individuals resident in France, owning or selling UK property can have significant tax implications, particularly regarding capital gains tax liabilities, and requires careful planning to optimize tax outcomes.
What Are the Tax Laws for Investing in France?
Investors in France face CGT on profits from shares, crypto, funds, and real estate. The PFU rate of 30 percent is common, but Assurance Vie and PEA tax wrappers offer significant tax benefits for long-term investors. Learn more in our Assurance Vie Guide 2025.
Investing in French capital or assets within the European Union can have specific tax implications, including cross-border tax treaties and exemptions. It is advisable to seek professional advice to ensure compliance and optimize your tax outcomes.
Planning Opportunities
How to Avoid Capital Gains Tax in France?
While completely avoiding CGT is difficult, you can reduce or eliminate it through:
- Holding property or assets long enough to qualify for tax relief
- Selling your main residence, which is often exempt from capital gains tax under French law
- Structuring investments through tax-efficient vehicles like Assurance Vie
- Using losses to offset gains
What Are the New Rules for Capital Gains Tax in France?
Recent changes include:
- Stricter residency rules for exemptions, including the application of the exit tax for individuals moving their tax domicile outside France
- Digital asset taxation now integrated into personal income tax returns
- Increased reporting requirements for foreign assets
For the most up-to-date rules, it’s vital to consult with a financial adviser.
Do the French Pay More Tax Than the British?
It depends on the income level and structure. While France does have higher social charges, many tax allowances and family-related reductions are available. UK expats may find the French tax system more nuanced but manageable with the right advice.
Unlike the UK, which offers a capital gains tax allowance to reduce taxable gains on asset sales, France does not have a similar capital gains tax allowance. This difference can significantly impact long-term tax planning and the timing of asset sales, especially for residents holding foreign assets.
FAQ – How Does Capital Gains Tax (CGT) Work in France?
Do I pay capital gains tax when I sell my house in France?
If it is your main home, you are usually exempt. For second homes, tax applies but reduces over time.
How long must I own a property in France to avoid CGT?
You are exempt from income tax on capital gains after 22 years and from social charges after 30 years.
Can non-residents sell French property without paying CGT?
Non-residents are generally subject to 20 percent tax plus social charges, though treaties may apply.
Are shares and investments taxed differently?
No. Capital gains on shares are subject to the same flat 30 percent rate, unless a tax wrapper like Assurance Vie is used.
Do I have to declare foreign capital gains in France?
Yes, if you are a French tax resident, you must declare worldwide capital gains.
How We Can Help
Understanding how capital gains tax works in France is crucial, especially for expats navigating two tax systems. At Harrison Brook, we specialise in helping expats structure their finances efficiently, reduce tax liabilities, and optimise investment returns.
From property sales to investment planning, our team provides tailored, regulated financial advice to ensure you stay compliant and tax-efficient.
Book your free consultation today and discover how we can support your financial future in France.
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