Selling an apartment in France: How to reduce profit taxes?

Our French Tax Lawyers can assist you in saving on capital gains when you sale your real estate in France.

Pursuant to Article 39 of the General Tax Code, capital gains realized by a taxpayer carrying on business in connection with the sale of a property to a leasing company may under certain conditions, be amortized over the age of fifteen.

It should render these innovative provisions that took effect temporary April 23, 2009, and in principle cease to apply to 31 December 2010.

1. Terms and conditions:

To benefit from the spreading device, taxpayers should be subject to either the corporate tax, either income tax in the categories of business profits, agricultural profits or non-commercial profits (including for share of surplus value produced by a company under the taxation of partnerships in which they are associated, which would be taxable on their behalf under the same conditions).

The transfer must relate to a building or undeveloped capitalized balance sheet of the transferor, or the register of capital assets.

By cons, are not affected by the measure, transfers involving property, with rights related to real property or securities of real estate companies.

Furthermore, the assignment must be made to a leasing company, that is to say, a business undertaking other regular operations of leasing.

Pursuant to Article L. 515-2 of the Monetary and Financial Code, the transferee is necessarily a business licensed as credit institution.

Finally, the benefit of these provisions is subject to the transferor immediately regains possession of the property transferred as part of a contract of leasing real estate.

The seller became "lessee" shall maintain a continuous enjoyment of the property sold. If it decides to sublet, this choice does not affect the fulfillment of this condition.

2. Terms of use:

This spreading device is optional.

The fact is therefore to use it for business management decision applicable to them, particularly in cases of tax audits.

 

When exercised, the option is on the whole capital gain related to the transferred immovable, in the short term and long term. It is therefore not possible to spread the only gain in the short term or the only value to long term.

Each component of the gain spread is subject to the tax of its own.

Thus, in respect of each fiscal year, the gain in the long term is imposed at the rate applicable to such gains, and the gain in the short term is added to the result of exercise.

The capital gain entitlement to the spreading is only that relating to the property assigned and reassigned to the transferor (after possibly the deduction for holding period specified in section 151 of the CGI f B. or partial exemption provided for in section 151 of the Code f).

In the latter case, when the net gain for the year came in part from the sale of other assets, only the portion of the net gain related to the building under the provisions of Article 39 novodecies is likely to benefit from spreading.

However, it may not be combined with the provisions of Article 39 quaterdecies which provide, for companies subject to tax on income, a spreading of the net gain in the short term over the year achievement and the following two years.

 A company subject to tax on income realized a gain short-term € 15 000 following the transfer of property to a leasing company, a gain in the short term 7500 € and a loss of € 6,000 related to other assets.

The net gain for the year, or € 16 500, falls within the scope of Article 39 of the CGI novodecies to the tune of 15 000 €. If the company qualifies for a partial exemption of 60% of its net capital gains under section 151 f of the Code, the taxable gain or € 6,600, can benefit from spreading up only of 6 000 €.

The spreading is done by exercise. The capital gain is distributed equally, each of fiscal years ending during the term of the lease, not exceeding fifteen years. It must therefore be linked to the results of the exercise of initiative, and those subsequent years.

Each fraction is equal to the amount of capital gains, divided by the number of exercises to be closed until the end of the contract of lease or, if the contract exceeds a period of fifteen years, until the end of this period following the signing of this contract.

The capital gain is added back in equal shares, each of fiscal years ending during the period so determined.

In case of change of the closing date of the exercise resulting in a change in the number of periods prior to the expiry of the leasing contract or the period of fifteen years, the company must recalculate the amount of each fraction according to the new number of financial years between the date of amendment and termination of the contract of lease.

It is the same in case of signing a contract amendment to amend the lease term thereof, and will alter the length of deferral. In this case, the company is also obliged to recalculate the amount of each fraction, according to the new time-averaging.

It is terminated spreading in case of acquisition of property by the "lessee", or termination of the lease. For the purposes of this device, the termination of the lease means any event terminating the legal relationship between the leasing company and the "lessee".

In particular, and subject to the provisions of Articles 202 ter, 210 A and 221 bis of the CGI allows, under certain conditions, not to impose immediately the benefits of tax deferral, the cessation of activity by the "lessee" or transfer of rights in the lease contract by the latter prevails immediate taxation of the gain.

3. Reporting requirements:

The spreading device does not have specific reporting requirements.

The option for this plan a reality so by registering on the part of the gain subject to a spread in cadreII. "Deductions" of Table 2058-A (WZ and WV lines depending on the nature of the gain) or 2033-B (line 350).

At this level, it is clear that accounting firms have a mission of "supervision" in the true sense of the term, either naturally in the context of the Biosafety "tax".

Under each year, the portion of the gain in the short term will be reinstated in Table 2058-A (line WN) or in Table 2033-B (line 330).

And the fraction of surplus value in the long term to be stated on the declaration of results for the year (No. 2031, No. 2035 or No. 2143) will be carried over the declaration of all income "Sir or Madam everyone."

Monitoring will be done using Table 2059-B for gains in the short-term business plan within the normal real. For those subject to a simplified tax and capital gains in the long term, condition monitoring similar to category A of Table 2059-B will be provided when filing the declaration of results for each of the years ended the duration of the schedule.

This state will specify the length of deferral restraint.

For taxpayers who do not belong to a real regime of taxation, the option for the spreading device is written on plain paper in support of the declaration of all income.

For each of the years covered by sprawl, it will be necessary to attach a tracking similar to category A of Table 2059-B.

Here is a perfect illustration of the balance system between the "favors and constraints", anchored permanently in our tax legislation.

The "ransom to be paid" by taxpayers carrying on business, wishing to benefit from the spreading of a capital gain referred to in Article 39 of the General Tax Code, in fact passes through declarative constraints on fifteen years ...

Without encroaching on the "turf" of Chartered Accountants on the contrary, tax lawyers also have a role to play in helping companies to secure a significant tax optimization, proposed in the immediate simply to December 31, 2010.

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