Capital gains tax

[hughnique]

Being close to the initial signing on the sale of our house, we have decided, at this stage, to appoint our own notary to ensure we don't get screwed Initially bought in 2005, old barn 10 metres from the house in the same grounds, converted by me in to a gite, and finally let for 6 separate lettings in 2018, then it stopped and hasn't been used since apart from when friends and family visit. To cut it short the notary appointed initially by our buyer has muted the question of CGT, but only on the Gite which they are calling a maison secondaire. Am I going round the bloody twist, my understanding is that as this is our residence principale CGT is not applicable, yet both the notary's seem unsure of the implications, I assume our appointee is going to rewrite the sales agreement to reflect this but even he said it is up to the impots as to the final verdict.

[MAD87]

I'd have thought any notaire worth his/her salt could get the answer in 5 minutes by ringing the local impôts.

[RobertArthur]

I'm not an expert in French tax law. Only a thought for what it's worth. In the case of a résidence principale all the dépendances (garages, aires de stationnement, granges, cours, brico shed, little gîte etc.…) included you pay only one taxe foncières for everything, no taxe d'habitation anymore. In the case of une maison secondaire you still pay those two taxes. Question: did Mr. Taxman impose you for both these taxes? In the past or present?

The regs or not crystal clear, read this for example (the word peut):

Taxe d’habitation : cette taxe peut concerner un gîte si le logement reste à disposition du propriétaire en dehors des périodes de location. Lorsqu’il ne s’agit pas d’une résidence principale ni d’un local affecté uniquement à la location, l’administration fiscale peut considérer que cette taxe est due. Source.

It has been for some a rough ride. A local farmer, his main building and home on one side of the road, huge grange for his tractors, cows and other animals on the other side of the road, always taxed as being one undivided property, saw after the changes in the taxe d'habitation regs his grange promoted to the maison principale league. And his house, already for generations in the family, to the league of maisons secondaires. Two years later and the problem is still there......talking to a brick wall, even if you are fluent in French from early childhood.

[hughnique]

Thank you Robert some very interesting points therein especially the fact that we do not pay TH, on anything here so how it can be designated as a MS is beyond me. I have just dug out paperwork regarding the conversion, barn to Gite, granted in 2008, finished in 2010, and let 6 times in 2018. Seems a long time between finish and letting, but I can't remember why the delay. I know we got off to a bad start trying to advertise it, and it wasn't until we went with the robbing buggers, Novasol, that we had some continuity of bookings. Time will tell.

[RobertArthur]

Monsieur le notaire, plus royaliste que le roi? Running for cover for non existing fire? Afraid of Monsieur le fisc hiding in Château de Bercy in Paris?


Edit:

Have been reading several French discussions. Simplified question: une annexe habitable peut-elle être considérée comme une habitation secondaire? As long as it doesn't have its own numéro de rue and no separate road for access, as long as it belongs to the same parcelle(s) cadastrale(s) as the the main building (see the taxe foncière), as long as it is not larger than the main building, my understanding is that your annexe is outside the standard definition. Additional considerations: if this annexe habitable gets its electricity from the same raccordement électrique as your house, the same for the water supply and the fosse septique, if I were a lawyer, I would have a tough job proving that it is has to be considered as une maison secondaire. This is only the opinion of simple believer in Ohm's law (1827). Almost two centuries later still relevant, although there are some green all-electric lobbyists who seem to have never heard of him or dismiss it as just an opinion. Don't look back, prepare for the future...

[hughnique]

Sorry to drag this one up again but yesterday we signed the initial agreement, and this CGT question reared it's ugly head. I can only do my research on the internet, and from what I can gather, it seems that the notary, unfortunately, seems to have made a bit of an error.
As I said earlier originally purchased in 2005, old barn in grounds converted in to extra accommodation under planning consent granted in 2008 and finished in 2010, so looking at the table of abatement, given on all the explanation of French CGT, you get zero allowance for the first 5 years, and then it is on a sliding scale of 6% every year after, so if I bought the property in 2005 and am selling it in 2026, making that 21years in total, so the abatement / allowance would start coming in to effect in 2010, and according to my calculations after the initial 5 year zero period we should be looking at a corresponding 21 years of allowance @ 6% a year, which I believe carries up to 20 years and then drops to 4% for year 21. This would then give me an allowance to set against the CGT of at least 90%, and not as the notaire has calculated at only 15 years and 60%, he seems to be using the year that the construction, renovation was finished in 2010 as a starting point and not from when the initial purchase was made. Am I missing something here or am I right?

[RobertArthur]

@ Hughnique, a quick comment, and for other readers also the way this taxe sur la plus-value works, as far as I understand the underlying principles.

If you sell your second home in France at a profit, you will have to pay “taxe sur la plus-value”. This is a tax on the profit made on the sale. The profit is the difference between the purchase price and the sale price. You can add certain costs to the purchase price, such as purchase costs and renovation costs. You can then deduct certain costs from the sale price, such as estate agent fees.

For the enthusiastic DIYer, the final calculation of what you can claim for renovation costs is somewhat disappointing. Only those costs for which an invoice from an official contractor is available and can be substantiated with proof of payment (bank statements) are eligible for deduction.

For reference: this is what the "Notaires de France" have to say about this taxe.

Perhaps we are both missing something. The only way to find out is ask for a clarification.


Cher Monsieur le Notaire, si vous me le permettez, j'aimerais vous poser une question concernant le calcul de la taxe sur la plus-value, car je ne suis ni juriste ni spécialiste du système juridique français. En tant que profane, j'avais cru comprendre que l'année d'achat servait toujours de point de départ pour le calcul de cette taxe. C'est pourquoi j'ai été un peu surpris de lire que votre étude notariale n'a pas utilisé la date d'achat, mais la date à laquelle les améliorations apportées à la maison ont été achevées. Il s'agit en effet d'améliorations intermédiaires.

[hughnique]

Once again Robert a very good statement and one with your permission I would like to send to the notary for his observations, when you say intermediate improvements, what are you meaning from that?

[Blaze]

I'm not sure if this is relevant, but I remember reading or hearing somewhere that if you have a gite or maison d'amis attached to the house but with a separate entrance, this could be considered as a maison secondaire by the fisc. So a separate building is likely to be even more in the firing line.
It really does seem to depend on who you get to deal with at the tax office.
@RobertArthur It really does show what ludicrous scenarios the fisc thinks up as regards farmers. How can outbuildings be considered as résidences principales and the farmhouse be considered a secondaire ?? It makes you wonder what they're teaching these days.

[RobertArthur]

@ Hughnique, when you buy une maison habitable and decide after several years that it is time for a renovation this is imo under the scope of the standard regs as outlined above.

On the other hand, if you were to purchase une grange that is not yet habitable, and if that barn can only be considered a decent place to live after several years of renovation to bring it up to standard, then I think it would be a different story. Perhaps there has been a misunderstanding somewhere.

To include this in your request for clarification to Mr Mme le/la Notaire, you could add a few lines of text, just a suggestion:

Pour mémoire, nous avons acheté ce bien immobilier à l'époque en tant que « maison habitable ». Ce n'est qu'après plusieurs années que la grange, qui se trouvait déjà sur notre terrain depuis la date d'achat, a été rénovée. Se pourrait-il qu'il y ait eu un malentendu à ce sujet ?

Veuillez agréer, Madame, Monsieur, l'expression de nos salutations distinguées.



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