Reference: Council of State, 28 September 2022, No. 21-40.018
Introduction
The taxation of capital gains on immovable property for non-residents constitutes a major issue for foreign nationals wishing to invest in or dispose of property located in France. The judgment of the Council of State of 28 September 2022 (No. 21-40.018) clarified the application of the 19% rate and social security contributions, providing welcome legal certainty. As a lawyer specialising in international property law, I offer you a detailed analysis of this decision and its practical implications.
The Legal Framework for Capital Gains on Immovable Property for Non-Residents
Principle of Taxation
Pursuant to Article 244 bis A of the French General Tax Code (CGI), natural persons not domiciled in France for tax purposes are subject to a flat-rate levy on capital gains realised upon the disposal of immovable property situated in France. This levy is set at 19% on net capital gains, to which are added social security contributions at the rate of 17.2% (generalised social contribution, contribution for the repayment of social debt, social levy, additional contribution).
Exemptions and Allowances
Allowances for holding period are provided for by Article 150 VC of the CGI: 6% per year from the 6th to the 21st year, then 4% in the 22nd year, resulting in a full exemption after 22 years. However, these allowances do not apply to social security contributions, a point which was contested before the Council of State.
Analysis of Judgment No. 21-40.018 of 28 September 2022
The Facts and the Question Referred
A non-resident taxpayer had disposed of immovable property in France and contested the application of social security contributions on the capital gain, arguing that they were contrary to European Union law (free movement of capital). He sought the application of the holding period allowance to all impositions, including social security contributions.
The Decision of the Council of State
The Council of State dismissed the application, ruling that the French regime is not discriminatory. It recalled that social security contributions are applicable to both residents and non-residents, and that the absence of a holding period allowance for these contributions is justified by their nature as social contributions, distinct from income tax. The decision is based on Article 244 bis A of the CGI and on the case law of the Court of Justice of the European Union (CJEU, judgment in Hervis).
Practical Scope
This decision confirms that non-residents must pay social security contributions at the rate of 17.2% without the holding period allowance, which increases the total tax burden to 36.2% (19% + 17.2%). It underscores the importance of rigorous tax planning prior to any disposal.
Practical Advice for Non-Residents
Anticipating Taxation upon Acquisition
- Holding Structure: Opting for a French property investment company (SCI) may offer tax advantages, but attention must be paid to the rules of tax transparency.
- Tax Treaty: Check whether the bilateral treaty with the country of residence provides for a reduced rate or an exemption.
- Holding Period: Retain the property for more than 22 years to benefit from the full exemption from capital gains tax (19%), but not from social security contributions.
Upon Disposal
- Precise Calculation: Have an estimate of the net capital gain and social security contributions prepared by a chartered accountant.
- Filing Deadlines: The capital gain must be declared within one month following the disposal (Article 244 bis A of the CGI).
- Payment: The notary withholds the amount due at the time of sale and remits it to the Public Treasury.
How Maître Cécile Zakine Can Assist You
As a lawyer specialising in property law and international taxation, I offer tailored support:
- Tax Audit: Analysis of your personal situation and the optimal holding structure.
- Negotiation: Assistance during acquisition or disposal to secure tax clauses.
- Litigation: Representation before the tax authorities or courts in the event of a dispute.
- Private International Law: Consideration of conflict of laws rules and international treaties.
Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.
Conclusion
The judgment of the Council of State of 28 September 2022 reminds non-residents of the importance of a ge
