Last Updated on 23rd April 2025
Tax residents living in France or expatriates considering a relocation should always ensure they factor capital gains tax into the equation. The impacts from a tax liability perspective can be meaningful, especially if you intend to sell, transfer, or restructure your investments.
For many, the immediacy of income taxes takes precedence, but understanding how capital gains tax is levied and calculated may be an essential aspect of your plans, ensuring you can consider the pros and cons of retaining or selling property assets and holding or transferring financial products.
In this article, we’ll run through an outline of the capital gains tax system in France, explain why accounting for all your tax liabilities can make a sizable impact on your longer-term tax profile, and point out some of the stumbling blocks you may need to be aware of.
An Overview of the Capital Gains Tax System in France Against Investment Assets
We’re focusing specifically on investment assets, which means that the relevant tax legislation is the Budget Act, introduced by the French government in 2018 to simplify the way taxes are levied.
The basics are that most investments with a taxable capital gain attract a 30% tax rate. This is a combined rate that includes a standard 12.8% tax charge and an additional 17.2% social security contributions. This flat rate tax applies to any taxable capital gain arising from the sale of dividends or securities.
Higher earners subject to top-rate personal income taxation may be obligated to pay an additional 45% tax rate, but there are opportunities to claim rebates, which depend on the length of the time taxpayer has owned the asset before disposal:
- Assets that have been held for two to eight years benefit from a 50% reduction in the capital gains tax charge.
- Those held for more than eight years attract a more generous 65% deduction.
Contrasts exist, though, between the taxes payable on the sale of investment assets depending on whether the individual is a tax resident or a non-resident.
Tax residents can choose to have a capital gain added to their taxable income, which means the gain is subject to the applicable charge at the prevailing rate. This may be beneficial if they fall into a lower income tax band. The other advantage is that they may also be able to claim an allowance of 40% against the taxable gain—which does not apply when paying capital gains tax.
Non-residents may be subject to a withholding tax against the sale proceeds or the capital gain, with a rate of either 25% or a lower 12.8% if they are exempt from social charges.
Understanding French Capital Gains Tax Liabilities When Selling an Investment Property in France
Another scenario in which capital gains tax on investments comes into play is when a taxpayer owns a residential property—either as a standalone rental asset, a secondary residence, or as part of a property portfolio—and decides to sell it.
Typically, the gain made would be exposed to a capital gains tax levy, but there are exemptions if the owner was using the property as their principal residence at the time the sale was made.
This does mean providing evidence that the owner was living in the home as their main residence, but the thresholds are minimal, and many opt to utilise this exemption to avoid paying capital gains tax unnecessarily.
However, the opposite rule also applies. A property owner who has held a real estate asset in France and lived there as a primary home for many years could still be obligated to pay capital gains tax if they choose to rent it out, even if just for a few weeks prior to the sale.
The French Capital Gains Tax Rates on Investment Property Sales
Should a property sale be liable for capital gains tax in France, this applies as follows:
- A flat rate of 19% applies to taxable gains worth up to €50,000.
- Further gains above this threshold are taxed at a surcharge of between 2% and 6%.
- Social charges of 17.2% remain payable but are lowered to 7.5% for citizens from the EU or EEA.
British nationals living in France for part of the year or with a holiday home but who remain non-tax residents are not obliged to pay social charges on these transactions, which means they may be able to pay a lower 7.5% solidarity tax rate.
French residents are normally subject to a 36.2% charge, combining capital gains tax and social charges, plus a 2% surcharge for gains over €50,000 and an additional 1% for every €50,000 of taxable gain over €100,000.
There are tapering options that can lower that tax liability. They normally apply from 22 years of ownership, at which point the owner may be exempt from capital gains, and from 30 years for social charge obligations.
The Importance of Accounting for Capital Gains Tax on Investments as an Expatriate in France
As we’ve seen, the French capital gains tax system can be complex, with varied ways to claim allowances and exemptions, reductions, and alternative tax bases. This means budgeting for your tax liabilities is essential, and there may be several options to reduce your obligation.
We also frequently highlight the need to account for exit taxation, which isn’t technically a form of capital gains tax but can mean that French residents with significant share ownership or holdings in a French business have an additional tax to pay if they relocate in the future.
The exit tax applies a 30% flat rate against the calculated potential gains, including for assets that have not been sold, to mitigate residents relocating elsewhere to avoid paying a capital gains tax liability on a taxable gain that arose in France.
Our advice is, as always, to speak with one of our Chase Buchanan taxation specialists at our French offices in Bordeaux if you are planning to sell or dispose of financial or physical assets, unsure about how your plans will impact your tax position, or keen to optimise tax efficiencies across the board.
All investments carry risk, including the potential loss of capital. You should carefully consider whether investing is suitable for you, taking into account your personal circumstances, financial situation, and risk tolerance.
*Information correct as at April 2025