Non-residents selling French land for more than €150.000 have for many years been obliged to appoint a French fiscal representative (“tax agent”). The tax agents have worked out the non-resident’s capital gains tax (and social charge) bill which is deducted by the notaire on completion. The tax agents have provided a guarantee to the French government that the correct amount of capital gains tax has been paid. The seller has had to pay around 1% of the sale price to the tax agent for this privilege. Many sellers have found this cost excessive especially as it is linked to the sale price and not the gain. You could accordingly end up with a tax agent bill running into tens or hundreds of thousands of euros with a minimal gain.
The tax agents are nominated by the French government and are effectively tax accountants who agree the French capital gains tax exposure with the French administration so the risks of a claim are extremely small. Competition amongst the small number of tax agents is virtually non-existent. Foreign sellers often do not know about this extra charge until after contracts have been exchanged when the notaire tells them he has to appoint a tax agent.
No need for a tax agent from 1st January 2015
Concerned about attracting foreign money into France, the French government has announced that from 1st January 2015 there will no longer be a need to appoint a tax agent for residents of other EU countries. The capital gains tax will still have to be paid over by the notaire on completion but without a tax agent’s certificate that the correct amount of capital gains tax is being paid. It seems notaires will have to use the procedures for calculating the capital gains tax themselves which they already do for sales under €150.000. This will involve extra vigilance on the part of sellers to ensure that they get all the deductions they are entitled to as notaires will be likely to take a very conservative approach. This is very good news for the French property market as it removes a cost and some bureaucracy from the sale process.
- If you are selling it is probably best to complete after 31st December 2014 to avoid paying the tax agent’s fees.
- Check at the outset your notaire will not charge extra for working out the capital gains tax.
- Check the tax computation carefully to ensure all lawful deductions have been made.
David Anderson Solicitor Advocate, Chartered Tax Adviser and barrister (unregistered)
Sykes Anderson Perry Limited
9 Devonshire Square
London EC2M 4YF
Telephone 020 3178 3770
David Anderson Solicitor Advocate, Chartered Tax Adviser and barrister (unregistered) at Sykes Anderson Perry Limited Solicitors and Chartered Tax Advisers in London, England
This information has been prepared by Sykes Anderson Perry Limited as a general guide only and does not constitute advice on any specific matter. We strongly recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of any information or advice given or omitted. The information herein does not constitute investment advice. Always consult an IFA if before taking any investment decision