Capital Gains on French Property: Calculation and Tax Rates

The Calculation Formula

The Sale Price (CGI Art. 150 VA)

The sale price is the price stipulated in the notarial deed, increased by any augmentative charges and indemnities stipulated in favour of the vendor, and reduced by the following deductible sale costs actually borne by the vendor (the list is exhaustive):

• Estate agent or intermediary commissions;
• Mandatory certifications and diagnostic reports (asbestos, termites, energy performance, etc.);
• Mortgage release fees (frais de main-levée d’hypothèque);
• Architect’s fees relating to the sale;
• Eviction indemnity paid to a tenant;
• VAT paid by the vendor.

The declared price is taken at face value, even if it is below market value; but where a price dissimulation is established, the price may be increased by the concealed amount. In indivision sales, the gain is assessed for each co-owner on their proportionate share of the price. For instalment or annuity sales, the price is the total cumulative amount (excluding interest). Currency gains or losses on foreign-currency sales form part of the gain (CE 9-12-2021 n° 439987).

The value of furniture is excluded from the sale price for capital gains purposes, provided its existence and market value are justified.

The Acquisition Price (CGI Art. 150 VB)

Onerous Acquisitions

For property acquired by purchase, the acquisition price is the price effectively paid as stated in the deed, plus augmentative charges. It is then increased by:

• Acquisition costs: either a flat 7.5% of the acquisition price (covering notaire’s fees, intermediary commissions, and registration duties or VAT), or the actual and documented amounts of those same costs if higher;
• Works expenditure (see below).

Loan interest, even if incurred to finance the acquisition or repair of the property, cannot be added to the acquisition price.

Gratuitous Acquisitions (Succession or Donation)

For property received by succession or donation, the acquisition price is the value retained for the calculation of the succession or gift duties (CGI Art. 150 VB). Where the administration subsequently corrects that value (even after the sale), the corrected value must be used (CE 27-11-2019 n° 418379). Conversely, a voluntary rectification by heirs after a gain-generating sale does not entitle them to recalculate the gain (CE 25-5-1988 n° 81512).

The acquisition price is then increased by: the actual and justified acquisition costs (notaire’s deed fees, stamp duty, land publicity fees, and the proportion of succession or gift duties attributable to the property sold); and works expenditure as below.

Works Expenditure

Works of construction, reconstruction, enlargement, and improvement may be added to the acquisition price. The following conditions apply:

• The works must have been carried out by a company (not self-performed) since the building’s completion or acquisition — self-performed works are excluded (CAA Marseille 31-3-2022 n° 19MA02901);
• The taxpayer must justify amounts by properly issued invoices stating the address of the works site (invoices without the site address are refused: CAA Douai 4-12-2019 n° 18DA00417);
• Works already deducted as revenus fonciers charges, or included in the base of a tax reduction or credit (including Malraux works), cannot also be added to the acquisition price;
• Tenant-borne costs (decorating, carpets, wallpaper, etc.) are excluded unless inseparable from structural works;
• For built property held for more than five years, where actual works costs cannot be justified, a flat 15% of the acquisition price may be applied as the works addition — even if some works have already been deducted as revenus fonciers charges. However, the 15% flat does not apply if it is established that no works were carried out at all (CE 25-3-2019 n° 422943). The 15% flat applies only to built property, not to land.

Building Land: Viabilisation Costs

For building land (terrains à bâtir), infrastructure, road, network, and utilities costs (frais de voirie, réseaux et distribution) may be added to the acquisition price, whether or not imposed by local authorities (CGI Art. 150 VB, II-5°). This includes all development and viabilisation costs incurred in a lotissement operation.

Holding-Period Abatements

For property held for more than five years, the gross gain is reduced by an abatement that increases with each additional year of ownership. The abatement rates differ for income tax (IR) and social charges. The holding period runs from the date of acquisition (notarial deed date for purchases and donations; date of death for inherited property) to the date of sale. Calculated by reference to complete 12-month periods; fractions of years are excluded.

The Exceptional Abatement of 70% or 85% (GOU/ORT Zones)

Capital gains on the sale of built property or rights in built property benefit from an exceptional additional abatement where the following conditions are met simultaneously (CGI Art. 150 VE):

• The property is situated within the perimeter of a grande opération d’urbanisme (GOU) or an opération de revitalisation du territoire (ORT);
• The sale was preceded by a promise of sale with certain date between 1 January 2021 and 31 December 2023;
• The sale is completed by 31 December of the second year following the year in which the promise acquired certain date (i.e. by 31 December 2025 at the latest for a 2023 promise);
• The buyer commits in the authentic deed to demolish the existing construction and complete residential collective buildings within four years of acquisition, with a built volume of at least 75% of the PLU-authorised maximum.

The abatement is 70% as a general rule, and 85% where the buyer commits that social and intermediate housing will represent at least 50% of the total surface in the construction programme. A penalty of 10% of the acquisition price applies to the buyer for non-compliance. This exceptional abatement is applied after the holding-period abatement.

Losses: No Offset Rule

There is in principle no tax set-off between private real property capital gains and losses (CGI Art. 150 VD, I). Where a sale produces a loss, that loss is not deductible against other gains of the same type or against global income. The sole exception: where a property acquired in successive tranches is sold in a single block, net of the holding-period abatement, losses on some tranches may offset gains on others, provided the sale is recorded in a single deed between the same parties (CGI Art. 150 VD, II) — for example, a flat formed by merging two separately acquired apartments, or a property where bare ownership was acquired first, then usufruct.

Tax Rates and Calculation

The net taxable gain (after abatements) is subject to:

• Income tax at 19% (CGI Art. 150 U);
• Social charges at 17.20% (CSG 9.2%, CRDS 0.5%, solidarity levy 7.5%);
• Combined rate: 36.20%.

For gains exceeding €50,000 (net of abatements), an additional progressive surtax applies.

The High-Value Surplus Tax (CGI Art. 1609 nonies G)

An additional tax is levied on private capital gains on built property and property rights (excluding building land) where the net taxable gain exceeds €50,000. Building land is excluded from this surtax. Gains exempt from income tax (by application of the holding-period abatement after 22 years, the principal residence exemption, etc.) are also exempt from the surtax. The tax applies to individuals and to IR-transparent civil companies (SCIs).

A gain above €260,000 is therefore subject to a total combined rate of 42.20% (19% IR + 17.20% social charges + 6% surtax). In Corsican areas subject to the speculative overheating surcharge (Loi 2022-1726 Art. 28), the surtax rates are multiplied by five, bringing the maximum combined rate to 66.20% for gains above €260,000 on property in those zones.

Taxable Event and Declaration

The taxable event is the onerous transfer. In practice, the gain is taxed at the date of the notarial deed recording the sale (or the promesse synallagmatique if it constitutes the actual transfer of ownership: CE 29-12-2020 n° 428306). For a sale under a condition suspensive affecting the very existence of the contract (e.g. obtaining a bank loan), the taxable event is the date the condition is satisfied.

The declaration is filed on Form 2048-IMM (all built property and non-building land) or 2048-TAB (building land). The declaration must be filed, accompanied by payment of the tax, at the land publicity service, within one month of the notarial deed. In practice, the notaire handles the declaration and withholds the tax from the price paid by the buyer. Where the gain is fully exempt or where the sale produces a loss, no declaration is required — but the deed must state the basis of the exemption or the absence of taxation. The net taxable gain must also be reported on the main income tax return (Form 2042).

Expropriation: Special Rules

Expropriation for public utility is treated as an onerous transfer. The sale price for gain calculation purposes is the main expropriation indemnity (excluding accessory indemnities: relocation costs, lost rent, crop losses, etc.). Declaration and payment follow specific rules depending on whether the expropriation is recorded in a judicial order or an administrative deed.

The gain is fully exempt where the vendor reinvests the entire main indemnity in the purchase of one or more properties within one year of receipt of the indemnity (CGI Art. 150 U, II-4°). The condition is deemed met where at least 90% is reinvested. The replacement property may be of any type or use — it need not match the expropriated property. The same exemption applies to sales of property exposed to a major natural risk under C. envir. Art. L 561-3.

Special Tax on Building Land Newly Made Constructible

Communes may introduce a communal flat tax of 10% on the first onerous transfer of bare land that has become constructible through classification in a PLU (or equivalent document) as a buildable zone (CGI Art. 1529). This tax applies to sales by individuals and by civil companies under the private capital gains regime. It is calculated on the difference between the sale price (as for the capital gains calculation) and the acquisition price adjusted by the last INSEE consumer price index (excluding tobacco); where no reference price is available, it is assessed on two-thirds of the sale price. The communal tax is assessed and paid simultaneously with the capital gains tax, and is a separate levy that cumulates with the capital gains tax.

Exempt from the communal tax: dependencies of the principal residence; land classified as constructible for more than 18 years; land with a sale price below three times the purchase price; rights in land (usufruct, bare ownership, shares). Viabilisation costs are not deducted from the communal tax base.

Legal Notice. This article is provided for general information and educational purposes only. It does not constitute legal or tax advice. The exceptional abatement for GOU/ORT zones (CGI Art. 150 VE) requires a promise of sale with certain date between 1 January 2021 and 31 December 2023 and sale by 31 December 2025; verify continuing availability before relying on this provision. Social charge rates (17.20%) and IR rate (19%) are those applicable as at March 2025. The Corsican speculative zone surcharge (Loi 2022-1726 Art. 28) requires a government regulation defining eligible zones; check current status. Always consult a qualified French tax lawyer or notaire before a property transaction.