The French Amended Finance Act for 2013 and the Finance Act for
2014, both dated 29 December 2013, have been adopted and entered
into force on 31 December 2013. Some of their provisions bring
again new changes on real estate taxation.
Real estate listed companies (French SIIC)
Some adjustments are made to the tax regime applicable to listed
real estate investment companies (French SIIC).
The thresholds for mandatory distribution are increased from 85
per cent to 95 per cent for rental income and from 50 per cent to
60 per cent for property sale income. This increase applies for
financial years ending on or after 31 December 2013.
In counterpart, and precisely because of this mandatory
requirement, the exemption from the additional contribution of
three per cent to the corporate income tax for income distributed
under the SIIC mandatory distribution is legalised. This exemption
applies for payments made after 1 January 2014.
Besides, the scope of the withholding tax applicable to foreign
companies realising profits in France is completed in order to
better cover situations where the revenue generated in France is
not taxed ultimately. Thus, for financial years ending on or after
31 December 2013, listed real estate investment companies
established in the European Union (such as UK REITS) and for which
the profits realised in France are not taxed in their home country,
can no longer benefit from the exemption of the French withholding
Real estate capital gain tax for individuals
For sales made after 1 September 2013, a full tax exemption of
the real estate gain applies after a holding period of 22 years
(but still after a 30-year holding period for social security
contributions). Before the 22-year holding period, there is a tax
reduction of six per cent for each year of ownership beyond the
sixth year and the twenty-first year, and of four per cent for the
twenty-second year of ownership.
In addition, an exceptional reduction of 25 per cent also
applies to the sale of real estate properties made after 1
September 2013, but only for a period of one year.
Nonresidents capital gains
The legislation amends the scope and implementation rules of the
specific exemption that can benefit nonresidents on the sale of
their home in France. First, by waiving the condition of free
disposal of the property where the transfer is completed no later
than 31 December of the fifth year following the transfer of tax
residence outside France and second, by introducing a cap of
€150,000 of the net capital gain that is tax exempt.
The total amount of real estate transfer duties to be paid by
the purchaser of a property is increased in 2014 from 5.09 per cent
to a maximum of 5.80 per cent of the purchase price.
VAT on real estate transactions
VAT rates applying for 2014 are the following:
For the upgrade of the energy efficiency of existing buildings:
5.5 per cent
For development works: 10 per cent
For all other works and services in the field of real estate: 20
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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