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Capital Gains Tax (CGT) in France on Investments

Capital Gains Tax (CGT) in France on Investments

Capital Gains Tax (CGT) in France on Investments

Capital Gains Tax (CGT) in France on investments is not straightforward. It’s important to understand how gains are taxed as a French resident to ensure you are reporting the correct information to the French tax authorities.

How do you calculate a capital gain?

A capital gain is calculated by deducting any relevant costs from the sale proceeds of an asset.

Proceeds are the amount you receive for the asset – if it’s a share, this is the market value at the point of disposal. Costs include the acquisition fees of the shares or any dealing costs associated with buying or selling the holding.

The resulting gain is then assessed for capital gains purposes. The tax rate applied to this gain depends on the type of asset you are selling.

Securities (Shares/Funds):

Securities include assets such as individual shares or funds. They can be invested in through an investment platform

This is where it gets slightly more complicated. Since 1 January 2018, a flat rate of tax known as the ‘prelevement forfaitaire‘ applies to the sale of securities. The tax rate is 30% and compromises 12.8% income tax and 17.2% social charges. 

However, you can also elect to have the gain taxed according to your marginal rate of tax. The French Income Tax rates for 2022 are shown below:

Tax Band Tax Rate
€0 to €10,224 0%
€10,225 to €26,070 11%
€26,070 to €74,545 30%
€74,545 to €160,366 41%
€160,366 – 45%

 

As you can see, if you had low taxable income for the year, it would be more beneficial to make this election to reduce your tax liability.

Assurance Vies:

Assurance Vie’s are life insurance bonds that receive optional alternative tax treatment. You have the option to add the gain to your other income for the year (as above) or the following ways depending on when the contract was taken out:

Assurance Vie’s taken out prior to 27 September 2017

For contracts taken out prior to 27 September 2017, there is a sliding scale in terms of the taxation benefits. I have summarised the tax rates on gains below:

Contract length Income Tax Social Charges Total charges
0-4 years 35% 17.20% 52%
4-8 years 15% 17.20% 32%
8+ years 7.50% 17.20% 24.70%

 

Furthermore, if you hold the assurance vie for 8 years, you receive an annual allowance of €4,600 (€9,200 if married) which you can withdraw tax free.

Assurance Vie’s taken out post 27 September 2017

For contracts taken out after 27 September 2017, the ownership period required for the tax benefits increases:

Contract length Income Tax Social Charges Total charges
0-8 years 12.8% 17.20% 30.0%
8+ years 7.5% 17.20% 24.7%

 

As mentioned above, you also receive the annual allowance of €4,600 (€9,200 if married) for contracts held longer than 8 years.

Get In Touch

If you have any questions or are wondering about your investment options as a French resident, please do not hesitate to get in touch.

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