CAPITAL GAINS TAX REFORM: MODIFICATION OF TAPERED RELIEF RULES
The second Rectifying Finance Law for 2011 (Law of 19th September 2011) has reformed capital gains tax by modifying the rules applying to tapered relief.
Previously tapered relief applied after 5 years of property ownership at a rate of 10% of the net capital gain per annum leading to total exoneration after 15 years of ownership.
From 1st February 2012, the rates and time periods will be as follows:
-No relief for the first 5 years of ownership (unchanged)
-2% relief from the 6th to 17th year of ownership
-4% relief from the 17th to 24th year of ownership
-8% relief after the 24th year of ownership
After 15 years of ownership, the capital gain is exonerated for 20% of the amount
After 20 years of ownership, the capital gain is exonerated for 36% of the amount
After 25 years of ownership, the capital gain is exonerated for 60% of the amount
After 30 years of ownership, the capital gain is exonerated for 100% of the amount
30 years ownership is now necessary to be totally exonerated from capital gains tax
The above applies to secondary residences. The sale of the principal residence remains exonerated as under the previous rules.
For French residents, there has also been an increase in social security contributions which will lead to a total rate of taxation of 32.5% (currently 31.3%). The actual rate of CGT remains unchanged at 19%.