Capital gains tax in France is charged at a single rate of tax, irrespective of the income of the seller or the sale value of the goods.

Broadly speaking, the rate of taxation for residents of France is 27%, although this is to increase to 28.1% from January 2009. A slightly higher rate of 29% applies to share transactions, which will increase to 30.1% in January 2009.

There are then particular rules that apply depending on the nature of the asset that is sold, each of which we summarise below.

Land and Buildings

The sale of land and buildings in France is taxed at the rate of 28.1% (applicable wef January 2009), which applies to all types of real property, however acquired, whether by purchase, gift or inheritance, and however held, whether in personal ownership, or through a French property company (Société Civile Immobilière - SCI).

There are numerous allowances and exemptions that are available, notably on the sale of your principal home, which is completely exempt from the tax.

Whilst this exemption only applies if you are occuping the property at the time of the sale, those who are divorced or separated also get exemption, provided one of the parties is occupying the property at the time of the sale, and it occurs within the year of the divorce or separation.

If the property is not your principal home, then the level of the tax is reduced by 10% for each full year of ownership beyond 5 years, with complete exemption after 15 years of ownership.

There are also allowances you can offset against liability to capital gains tax, such as major building works carried out on the property, and there is also an exemption for retired or disabled persons on a low income.

Other Assets

The rules are a little more complicated for the sale of other assets. Whilst the general rule is that capital gains tax is applied at the same rate of 28.1%, as applies to land and buildings, there are some exemptions and differences.

The sale of cars, household effects and appliances are exempt from the tax, as are all sales under €5000.

As a general rule, there is tax relief of 10% per year, for every year held after two years, resulting in complete exemption after 12 years.

The tax is applied on more exotic assets such as jewellery, precious metals, fine wines, works of art and racehorses. Precious metals are taxed at the rate of 7.5%, whilst jewellery and works of art at the rate of 5%. In either case, these rates are without allowances, so you can alternatively opt to be charged at the standard rate and deduct eligible costs.

Shares

The capital gain on the sale of shares is currently charged at the rate of 29%, which will rise to 30.1% in 2009.

However, if the sale value of the shares is under €25,000 in the year (increasing to €25,730 for sales in 2009), then no tax is payable.

This means that if you have sold shares valued at €24,400, including a capital gain of €500, you will not pay capital gains tax.

Conversely, if you have sold shares valued at €26,000, having realised a gain of €1000, the gain will be liable to the tax!

However, with sales below €25,000 you cannot offset losses against gains.

There is full exemption on the sale of shares held for eight years.

Non-Residents

There are separate rules for non-residents of France. The applicable rate for real estate will depend on your country of origin.

Those from the EU pay capital gains tax on real estate at the rate of 16%. Those from outside of the EU pay at the rate of 33%. As for those resident, you get a 10% reduction in liability for every year of ownership beyond 5 years.

Moveable assets are generally exempt.

You can read more in our guide to Capital Gains Tax in France.