Property in France after Brexit: what changes for British residents?
Since 1 January 2021 and the entry into force of Brexit, the rules governing relations between France and the United Kingdom have changed significantly in the field of real estate. These changes concern UK tax residents, whatever their nationality.
So if you are French and live in the United Kingdom, here are the points of French law and taxation to bear in mind if you buy or sell property in France.
Selling your property in France after Brexit: a heavier tax bill
No change to the obligation to pay capital gains tax on property
Whenever the sale of a property located in France generates a capital gain, French capital gains tax on property applies. Broadly speaking, the capital gain is the profit between the original purchase price of the property (adjusted according to various factors) and its current sale price.
Example: you bought a house in Aix-en-Provence for 650,000 euros in 2018. You sell it today for 730,000 euros. To calculate the gain, the purchase price is adjusted to 700,000 euros under the applicable rules. The capital gain is 30,000 euros.
This tax has not changed since Brexit and its rate remains 19% for individuals.
Likewise, an additional tax (from 2% to 6%) still applies to gains above 50,000 euros. Land that has become building land is subject to two specific taxes.
Are there any exemptions?
There is a specific exemption for sales of property whose price does not exceed 15,000 euros.
For all other properties, the tax rate decreases gradually each year from the fifth year onwards until it disappears:
- after 22 years for income tax,
- after 30 years for social security contributions.
In addition, a special exemption exists if you were previously resident in France and sold your property when leaving the country. You will find all our explanations on capital gains tax for non-residents and the possible exemptions in this article.
In our example, you must pay 5,700 euros of capital gains tax in France.
The same applied before Brexit.
Social security contributions rise from 7.5% to 17.2% for British residents
Social security contributions (prélèvements sociaux) are an additional public levy of 17.2% on the capital gain.
Before Brexit, British residents were only subject to social security contributions at a reduced rate of 7.5%.
This reduced rate applies to all non-residents affiliated to a social security scheme of the European Economic Area (or Switzerland). As British residents no longer belong to this category, they are now taxed at 17.2%.
In our example, you must pay 5,160 euros of social security contributions.
Before Brexit, this amount would have been 2,250 euros.
British residents must now appoint an accredited tax representative
The accredited tax representative guarantees any adjustment of capital gains tax during the tax limitation period. This period corresponds to three years plus the current year at the date of the sale.
Before Brexit, British residents did not have to appoint an accredited representative when selling their property in France.
Since 1 January 2021, they are now required to do so where the sale price exceeds 150,000 euros and the property has been owned for less than 30 years.
The tax representative may be an individual resident in France, who must then be approved by the tax authorities on request after an assessment of their solvency. In that case, there is no additional cost.
But if you cannot find such a person, or if the tax authorities refuse to approve them, you will have to use a specialised company. This can cost between 0.4% and 1% of the sale price.
In our example, this would cost between 3,000 and 7,300 euros.
Before Brexit, as a British resident, you could have avoided this cost.
Buying property in France after Brexit: no tax revolution
When buying property in France, Brexit has not changed the tax consequences.
Whether the buyer is resident in France or in the United Kingdom, the same taxation applies to the purchase of property in France.
The taxes on your purchase form part of the so-called "notaire's fees" (frais de notaire). These actually include the notaire's remuneration but above all taxes, and finally a few disbursements. They amount to nearly 6% of the sale price for an older property.
If you buy a property for 730,000 euros, the transfer tax will be around 43,000 euros.
Letting your property in France after Brexit: higher social security contributions
The main difference arises if you plan to buy property in France to earn rental income. The same applies if you already own a property in France that you let.
In that case, British residents will have to pay tax on this income in France, together with social security contributions, as before. But social security contributions have risen from 7.5% to 17.2%.
In such a scenario, it is essential to check the tax consequences of the transaction. You should consider the different ways of letting (unfurnished, furnished, seasonal...) and of taxing rental income in France (flat-rate or actual expenses, professional or not...). If the property is already let, it may be worth reviewing the letting arrangements as soon as possible.
Conclusion
Brexit has brought major changes to the tax payable by British residents when they sell their property in France. On the other hand, the taxation of a purchase has not changed. However, if the purchase is intended for letting, social security contributions will increase considerably.
If you are French and live in the United Kingdom, we strongly advise you to contact your notaire to find out the tax implications of selling or buying a property in France.
It will also be useful to consult a British tax expert to find out how these transactions are taxed in the United Kingdom. In any event, France and the United Kingdom have signed a convention for the avoidance of double taxation on income and capital gains, which should be applied to each particular situation.
For David Notaires – Aix en Provence, Elodie Letouche