Answer ... (a) What taxes are levied and what are the applicable rates?
Capital gains realised on the sale of real estate are subject to tax at the global rate of 36.2% for 2020 (income tax at a flat rate of 19% and social contributions at a rate of 17.2%). However, rebates apply taking into consideration the duration period of ownership (see question 2.4(d)).
The sale of shares of a pass-through corporation (French or foreign) that owns real estate located in France as its main assets (qualified as a société à prépondérance immobilière (SPI)) is subject to the same regime as the sale of real estate.
The same treatment applies for residents (on the sale of their worldwide real estate and SPI) and non-residents (on the sale of their real estate located in France and SPI).
An additional tax (taxe sur certaines plus-value immobilière) also applies assessed on capital gains on real estate and shares of SPI exceeding €50,000 realised by both residents and non-residents. It is levied on the whole amount of the capital gains at progressive rates varying from 2% to 6% (for capital gains exceeding €260,000).
The same rate of 36.2% also applies to capital gains realised by French residents on the sale of precious metals, jewellery and artefacts, provided they do not elect for the application on the sale price of a flat tax amounting to 11% for precious metals and 6% for jewellery and artefacts.
Capital gains on shares and securities (and crypto-assets) are subject to a 30% flat tax (12.8% income tax and 17.2% social contributions) if realised by French resident taxpayers.
Shares, securities and financial investment are also, as a general rule, subject to an exit tax upon the transfer of residence of a taxpayer outside France.
Capital gains realised by non-resident minority shareholders on French corporations that are subject to corporation tax are exempt from French tax.
Unless a tax treaty provides otherwise, capital gains from the sale of securities or shares of corporations are taxable only when realised by a non-resident shareholder who owns (or owned during the five previous years), together with his or her spouse, ascendants and descendants, more than 25% of the shareholding in the sold company.
(b) How is the taxable base determined?
As a general rule, the taxable base is determined by the difference between the sale price and the acquisition price.
The acquisition price may be increased by acquisition fees, transfer duties or gifts/inheritance taxes and sales fees, according to rules that depend on the nature of the capital (property, shares, other movable assets when taxable).
(c) What are the relevant tax return requirements?
As ordinary income, capital gains may be subject to a withholding tax levied upon the sale of assets. They should also be reported in the annual income tax return filed by the household (see question 2.3(c)).
(d) What exemptions, deductions and other forms of relief are available?
Capital gains on the sale of the main residence are fully tax exempt.
The taxable basis of capital gains on the sale of real estate and SPI shares for income tax purposes is reduced by yearly allowances applying from the sixth year of ownership. The yearly allowance is 6% from the sixth year of ownership up to the 21st year and 4% for the 22nd.
As a consequence, the sale of real estate and SPI shares after 22 years of ownership benefits from a full exemption from income tax. However, social contributions remain due. Capital gains are fully exempt from income tax and social contributions only after 30 years of ownership.
Sales by residents and non-residents of movable assets, other than precious metals, jewellery and artefacts, are fully exempt.
Sales of precious metals, jewellery and artefacts made by non-residents are also fully exempt.
Exit tax does not apply to individuals who resided in France less than six years before transferring their tax residence outside France.
Capital gains on shares and securities realised by non-resident minority shareholders on the sale of shares of French corporations are fully exempt, as explained in question 2.4(a).