The French tax authorities have inserted in their guidelines the new calculation method of immovable property capital gains subject to income tax realised on or after 1 September 2013: (i) reform of the tax deduction for holding-period of immovable property other than building plot and (ii) establishment of an additional special tax deduction on capital gains realised on the sale of housing (BOI-RFPI-PVI-20-20 n°152 and following, dated 9 August 2013).
These measures, without any legal basis, should be included in the draft Finance Bill for 2014.
- Reform of the tax deduction for holding-period
Upon the disposal of immovable property other than building land or rights thereto, the rate and pace of the deduction for holding period for determining the tax base of the capital gains subject to income tax and social security contributions:
- The capital gain exemption from income tax is obtained beyond a holding-period of twenty-two years;
- The capital gain exemption from social security contributions of 15.5% is obtained beyond a holding-period of thirty years.
Regarding the disposal of building plots or rights thereto realised on or after 1 September 2013, the methods to determine the taxable basis of the capital gain for both income tax and social security contributions remain unchanged. However, the tax deduction for holding-period should be abolished as from 2014.
- 25% special deduction
For capital gains realised between 1 September 2013 and 31 August 2014 upon the sale of the sale of residential premises or rights thereto, a special tax deduction of 25% is applicable for the determination of the taxable net basis (i.e., after taking into account the deduction for holding period).