My wife and I jointly own a chalet property in France as individuals (not SCI). This was purchased 15 years ago. We are both UK Resident.We run the chalet during the winter months as a fully catered chalet for predominately UK guests, providing guests with bed, breakfast and dinner. We pay Income Tax in UK in the two years of profit as a partnership business and have received Income Tax relief against personal income in the other years that we have made a trading loss.In the subsequent years the value has increased and we have to consider selling. Do we have French Capital Gains Tax to pay if we sold it after the 15 years since purchase?If either of us dies (and at the time it is not for sale) what is the position on French Inheritance Tax having previously declared the business for Income Tax to UK HMRC (only)? As we have declared the Partnership business as a catered chalet we seem to be exempt UK IHT as the business will attract Business Property Relief on the property value to UK HMRC? Does France have similar BPR relief?
System of Law: EU
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Hello, Thank you for your questions. Here is my answer.
1) Do we have French Capital Gains Tax to pay if we sold it after the 15 years since purchase?
Yes, you will have to pay French capital gains tax, because your chalet is not your principal place of residence, but what the French would call your secondary place of residence. Also, the French law has evolved since 15 years ago. Today, ALL non resident foreigners who own property in France and who are seeking to sell their French property must hire a legal representative in France to make sure that the capital gains taxes are paid to the French law authority. The notaire who will be in charge of handling the papers of the sale of your chalet can assist you in finding a legal representative.
2.) If either of us dies (and at the time it is not for sale) what is the position on French Inheritance Tax having previously declared the business for Income Tax to UK HMRC (only)?
First, income taxes and inheritance taxes are two different taxes in France. You do not pay any taxes in France so you are only looking at paying French inheritance taxes if either of you die. Today there are no inheritance taxes between husband and wife. But, France just elected a new president and this president is thinking of changing the inheritance tax laws.
3) As we have declared the Partnership business as a catered chalet we seem to be exempt UK IHT as the business will attract Business Property Relief on the property value to UK HMRC? Does France have similar BPR relief?
No, France does not have a similar business property relief. Again, your business is not registered in France (it should be, but that is a totally different subject). In order to benefit from any French business relief, you need to first registered you business in France, and then it will depend on the type of business, etc…
I am glad I was able to help you.
1. I am aware that a Legal Representative is required and who would automatically pay to the French Tax authorities any taxes due and that his fee for this would be a percentage of the sale price to carry out the function, but you give no formula of Capital Gains Tax based on years of ownership, base cost of purchase (plus any acceptable / agreed intervening capital improvement expenditure). Please let me have a formula table so that I can calculate my potential circumstance.
2.I am not presently concerned with inter-spouse inheritance, but wish to know the rate, or bands, of Inheritance Tax that would be payable on the value of the property passing to our children (as per French inheritance laws of which I understand).
Thank you very much for your response.
My answers were based on the questions you asked and the information you gave me.
1) You asked “Do we have French Capital Gains Tax to pay if we sold it after the 15 years since purchase? I answered your question. My answer was yes.
You did not ask for a “formula of Capital Gains Tax based on years of ownership, base cost of purchase (plus any acceptable / agreed intervening capital improvement expenditure) so that you can calculate your potential circumstance.”
You do understand that I can not second guess and give you the answer to a question that you did not ask. I second guessed about the Legal Representative and you wrote to me that you knew that already. This shows that I can not guess what you know or what you do not know. So, I prefer sticking strictly to answering the question that was explicitly asked. Your request for a capital gains formula based on all the criterium you wrote above is a new and completely different question.
2) Again, my answer was based on the question you asked and the information that you gave me. I can not guess what you want to know or what you do not want to know. I can not guess if you and your wife have children either. My response was based on the information you gave me: you only wrote about you and your wife, you never mentioned children, this is why I gave you the information on French inheritance taxes concerning husbands and wives. Again, I prefer sticking strictly to answering the question that was explicitly asked.
You did not write that you wanted to know : “the rate, or bands, of Inheritance Tax that would be payable on the value of the property passing to our children.” This is a new and completely different question.
If the sale of the secondary property is after having owned it for more than 15 years, you will not have to pay any French Capital gains taxes.
Here are my answers for you 2 new questions:
4) Please let me have a formula [of Capital Gains Tax based on years of ownership, base cost of purchase (plus any acceptable / agreed intervening capital improvement expenditure table)] so that I can calculate my potential circumstance.
If you sell your secondary property after 15 years, you will not have any French capital gains taxes to pay. You will be exempted.
5) I […] wish to know the rate, or bands, of Inheritance Tax that would be payable on the value of the property passing to our children (as per French inheritance laws of which I understand).
The following is the amount that children have to pay in French inheritance taxes for amounts inherited above the non taxable amount of 159,000 euros (as of January 2012).
above the non-taxable amount
. Percentage of French inheritance taxes to pay
Less than 8.,072 €
Between 8,072 € and 12,109 €
Between 12,109 € and 15,932 €
Between 15,932 € and 552,324 €
Between 552,324 € and 902,838 €
Between 902,838 € and 1.805,677 €
Above 1,805,677 €
Thankyou. That is helpful.
You mentioned earlier (Para 3 above)that France does not have businesss property relief (BPR) but in the same para stated that " In order to benefit from any French business relief, you need to first register your business in France, and then it will depend on the type of business, etc…
I did not understand the technical difference bewtween the BPR you confirmed as not being available, but that "business relief" might be available if I registered the business in France.
In para 2 of my original enquiry I gave a summary description of the business. Can you please describe more fully the types of business relief that might currently be available in these circumstances and the sort of description of our business might be required to satisfy the French authorities.
All I was trying to get across was that if there are any tax benefits in France (I did not say there were French tax benefits available), the company seeking any French tax benefits must be registered in France.
You also asked another new question:
6) “Can you please describe more fully the types of business relief that might currently be available in these circumstances and the sort of description of our business might be required to satisfy the French authorities.”
I am sorry, but this is impossible to do on this forum. What you are asking is out of the scope of a French law expert. Only an avocat (lawyer) having access to all the details of your company could provide you with more personalized counsel in this matter.
I can not advise you on this website. It is against the JustAnswer policy. While I am indeed a French lawyer in Paris, on this website, I am just a French law expert answering questions on French law and on my free time. In order for me to counsel someone, I would need to see him/her (in person or on the phone), see all his/her documents, and establish a formal attorney client relation. In fact, the Just Answer disclaimer clearly states the following : "Posts are for general information, and are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), and do not establish a professional-client relationship." No attorney client relationship has been formed. Please also read the disclaimer below.
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Practicing law in France, 10+ years of experience on Paris Bar. Taught French Business Law in US
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