Capital Gains on French Property: Scope and Exemptions

Scope of the Private Capital Gains Regime

The private capital gains regime on real property (CGI Art. 150 U) applies to gains realised by individuals and by non-IS civil companies (other than those whose activity falls within BIC or BNC) in the course of managing their private patrimony. In practice, the civil companies primarily concerned are SCIs that occasionally sell properties they hold. Members of fiscally transparent attribution companies are treated as if they were directly the owners of the company’s property: individual members pay the private capital gains tax on their proportionate share of any gain.

Taxable Operations

Only gains realised on onerous transfers are taxable. These include:

• Sales in any form, regardless of payment terms;
• Exchanges, even without a balancing payment (soulte);
• Partitions other than those of a matrimonial community or a succession and their equivalent, but only to the extent of any balancing payment;
• Contributions to a company.

The registration of property on a business balance sheet (inscription à l’actif d’une entreprise individuelle) is not a taxable event — but if the property is subsequently sold, the pre-inscription private gain is calculated from the original acquisition price and the date of inscription is the reference for the later calculation of professional gain.

Exempt Transfers

Gratuitous transfers — donations and inheritances — do not give rise to a taxable capital gain. Matrimonial community and succession partitions, and their equivalents, are also outside scope.

Taxable Property and Territorial Scope

All built and unbuilt property (constructions and land) and all property rights (usufruct, bare ownership, easements, etc.) are within scope. Neither the origin of the property nor its use affects the analysis. Most French international tax conventions assign the right to tax real property gains to the situs state. For property in France, France has primary taxing rights whether the seller is resident or not. Non-residents selling French property are subject to the non-resident withholding regime under CGI Art. 244 bis A.

The Catalogue of Exemptions

Principal Residence: The Core Exemption

The sale of a taxpayer’s principal residence is fully exempt from capital gains tax, whatever the amount of the gain, whatever the motivation for the sale, and regardless of what the buyer intends to do with the property (CGI Art. 150 U, II-1°). The exemption requires only that the property be the habitual and effective residence of the vendor at the date of the sale. There is no minimum occupation period: even occupations of less than one year have been held sufficient where the occupancy was genuine (CAA Paris 21-2-2018 n° 17PA00527; CAA Lyon 19-8-2021 n° 19LY01666).

Where a taxpayer has multiple residences, they must be able to justify which was their habitual principal residence. The most reliable evidence includes: address used for income tax purposes (credits for principal residence charges), principal residence home insurance policy, school enrolment of children, professional address, and bank statements showing local expenditure patterns.

The Normal Sale Delay Rule

Where the vendor has vacated the property and the property is vacant at the date of the sale, the exemption still applies if the sale takes place within a normal delay from the date of vacating. The administration treats one year as a normal delay in standard market conditions, but emphasises that no absolute maximum can be fixed in advance: the normal delay is assessed on the facts, taking into account local market conditions, the asking price relative to comparable properties, the physical characteristics of the property, and the diligences undertaken by the vendor.

The Conseil d’État has confirmed a flexible approach: a sale two and a half years after departure was held exempt where a POS revision had slowed the transaction (CE 6-10-2010 n° 308051); atypical property characteristics and price reductions accepted by the seller are also relevant (CAA Douai 17-3-2022 n° 19DA01635). Where the vendor was forced to leave due to a sinistre rendering the property uninhabitable, the exemption is preserved on a subsequent sale provided the vendor arranged reconstruction as quickly as possible and then diligently pursued the sale.

Dependencies and Constructible Portions

The exemption extends to the immediate and necessary dependencies of the principal residence sold at the same time: garages within one kilometre, outhouses, parking areas, courtyards, and generally all land surrounding the residence that is not being sold as building land (CGI Art. 150 U, II-3°). Where a portion of the parcel is constructible, the constructible portion must be separated for tax purposes and does not benefit from the exemption, even if the cadastral division is only effected after the sale (CAA Marseille 18-2-2020 n° 18MA02365; CE 8-4-2022 n° 447694). Dependencies may be sold to a different buyer from the main residence, provided the sales occur within the normal delay period.

Special Cases

The principal residence exemption also applies to: the sale of a property under construction where the sale is forced by job transfer, invalidity, or death, and the property was intended as the principal residence; the spouse and children of a tied-accommodation employee (fonctionnaire logé): the conjugal family home qualifies even if the employee’s official address is the tied accommodation; and a sale under a condition suspensive: the date for assessing whether the property is the principal residence is the date of satisfaction of the condition (CE 24-11-2017 n° 396209).

The following do not benefit from the principal residence exemption: properties let to tenants; properties made available free of charge to family members or third parties; and land on which a mobile home is placed (unless the caravan or mobile home is permanently fixed to the land — CAA Paris 31-3-2016 n° 14PA02634; but a houseboat subject to taxe foncière and occupied as principal residence does qualify).

First Cession of Non-Primary Housing with Reinvestment

An exemption is available for the first sale of a property that is not the vendor’s principal residence, subject to two cumulative conditions (CGI Art. 150 U, II-1° bis):

The exemption is limited to the fraction of the sale price actually reinvested. It must be claimed expressly in the sale deed. Each individual may benefit from this exemption only once (on any sale from 1 February 2012 onwards). The exemption also covers the immediate and necessary dependencies sold at the same time, but not a constructible parcel forming part of the same site (CAA Marseille 22-4-2021 n° 19MA00832). Failure to reinvest within 24 months triggers recapture in the year of the breach.

The €15,000 Threshold

Capital gains on the sale of property (including property rights) are fully exempt where the vendor’s share of the sale price does not exceed €15,000 (CGI Art. 150 U, II-6°). Key rules:

• The threshold is assessed property by property, not annually: a single taxpayer can benefit multiple times in a year on different properties;
• For a sale by spouses, the threshold is assessed against each spouse’s individual share — in the most common case of equal shares (50/50), a couple may sell for up to €30,000 without tax;
• For an indivision sale, the threshold applies to each co-owner’s proportionate share of the price;
• For sales of usufruct or bare ownership alone, the threshold is assessed against the full ownership value of the property (or fraction), not just the value of the right being transferred;
• Where multiple lots forming one cadastral unit are sold to the same buyer, the total price of all lots is aggregated for the threshold test.

Retirees and Disabled Persons of Modest Means

Holders of a retirement pension, a disability card, or a carte mobilité inclusion bearing the disability mention are exempt from private capital gains tax on all their property sales, provided two conditions are met simultaneously (CGI Art. 150 U, III):

• They were not liable for the IFI in either of the two years preceding the year of sale;
• Their revenu fiscal de référence for the year preceding the sale does not exceed the applicable threshold (for sales in 2023: €11,276 for the first part of the household quotient, plus €3,011 for each additional half-share).

The exemption also applies where it is the spouse or joint tax partner who holds the pension or disability card, not the vendor. A surviving spouse receiving a pension de réversion qualifies. Where the disabled person is a dependent child attached to the parents’ tax household, only the child’s own income is assessed against the threshold, not the parents’ income.

Care Home Residents: Former Principal Residence

Persons residing permanently in a care home or long-term residential establishment (Ehpa, Ehpad, logement foyer, petite unité de vie, unité pour personnes désorientées) and adults with disabilities placed in an accueil spécialisé facility benefit from a specific exemption on the sale of their former principal residence (CGI Art. 150 U, II-1° ter), subject to three conditions:

• In the year before the year preceding the sale, the seller must not have been liable for the IFI and their revenu fiscal de référence must not exceed the threshold (for 2023 sales: €26,515 for the first part, plus €6,195 for the first additional half-share and €4,877 for each further half-share);
• The property must not have been occupied by anyone since the owner’s entry into the care facility, except by a member of the owner’s tax household or their concubin;
• The sale must take place within two years of entry into the care facility — calculated from the date of entry even if the property was no longer the principal residence at that date.

Other Exemptions

Remembrement and Assimilated Exchanges (CGI Art. 150 U, II-5°)

Gains on exchanges within urban or rural remembrement operations are exempt, but the exemption is a deferral, not a permanent relief: on any subsequent sale of the remembered property, the gain is calculated as if the property had been acquired at the same price and date as the original property contributed to the exchange. Where that original date is more than 30 years before the subsequent sale, the gain is fully exempt.

Insured Losses (CGI Art. 150 VA, II)

Where a property has suffered an insured loss (fire, flood, etc.), the insurance indemnity received is not added to the sale price for the purpose of calculating the capital gain on a subsequent sale. Additionally, where the property was the principal residence and the owner was forced to vacate due to the sinistre, the principal residence exemption is preserved on the subsequent sale provided the owner arranged reconstruction and then diligently pursued the sale.

Surélévation Rights (CGI Art. 150 U, II-9°, until 31 December 2024)

The gain on the sale of a droit de surélévation (the right to build on top of an existing building) is exempt where the buyer commits in the deed to constructing and completing exclusively residential premises within four years of acquisition. If the buyer fails to fulfil this commitment, they are liable to a penalty of 25% of the sale price of the right, unless the failure results from the buyer’s redundancy, invalidity (category 2 or 3), or death, or from exceptional circumstances outside the buyer’s control. This temporary exemption was extended to 31 December 2024 by Loi 2022-1726 du 30-12-2022, Art. 7.

Legal Notice. This article is provided for general information and educational purposes only. It does not constitute legal or tax advice. Revenue and IFI thresholds cited are those applicable to 2023 sales (revenu fiscal de référence of 2022); these thresholds are revised annually and should be verified for current transactions. The normal sale delay rule is a question of fact assessed on all the circumstances; no absolute period can be guaranteed. The surélévation rights exemption was in force until 31 December 2024 as extended by Loi 2022-1726; post-2024 availability should be verified. Always consult a qualified French tax lawyer or notaire before any property transaction.