Dear Val,
Following a meeting I had recently with a Notaire, your readers really should read this! I’d be very grateful if you could post it. Thanks!
Capital Gains Tax (“Plus-Value”) in France
Following a recent meeting with a Notaire on behalf of one of our clients who is hoping to sell his property, there are some issues which any of you in a similar position need to know about. I know with 100% certainty it will affect many of you!
We all know that factures for works done on a property can be offset against Capital Gains Tax in the event of a sale. What many of you will not know, however, are the limitations and restrictions which apply to what you can offset. Here are a few very important notes.
Firstly, factures can ONLY be used to reduce Capital Gains if they are:
- From a French-registered company with a SIRET number
- Factured with not only the full name of the company, but also showing the SIRET and the Intra-Communautaire TVA number
- Factured ENTIRELY in French (this is a really important one – many enterprises here will produce it in English for their convenience and yours)
- (If your factures ARE in English, go back to the artisan and ask for it to be re-issued in French)
- Factured showing a full description of the work, the labour broken down, AND the materials purchased
This last one is also of great importance, as often the clients purchase the materials on behalf of the artisan. This has the advantage of keeping the artisan’s turnover lower, and you often get the stuff cheaper – but it renders not only the artisan’s facture worthless (in terms of Capital Gains usage) but also your one for the materials. NEITHER can thus be claimed.
Even if you have purchased a load of materials yourselves (sometimes running into tens of thousands of Euros) and done the works yourselves, these materials can no longer be claimed against Capital Gains. In 2004, the French Government realised that people were buying a host of materials and then claiming to be “Bon Bricoleurs” and doing the work themselves. They also realised that in fact a lot of the work was then being done “in the black” by artisans for cash. So they clamped down on this – you can no longer claim ANY of these materials costs against Capital Gains if you have bought them yourselves.
In essence, the only factures you can now claim for are complete ones billed to you from registered artisans – labour and materials. And only if they are all written in French.
In addition, you can only claim for factures for essentials (whether new construction or renovations, either is okay) as long as the work is deemed to be “essential” and not “for comfort.” Therefore renovating a roof, repointing walls, rebuilding walls, installing electricity/water for the first time – fine. Installing double glazing, a swimming pool, redecorating, even perhaps central heating – NOT fine, except in certain circumstances.
Whatever you DO claim, the Government can decide to investigate your ENTIRE claim at any point in the three years following a sale. If they decide to investigate one item, they will then investigate all of the items. With a fine tooth comb.
This list of items is far from exhaustive. If you are hoping to sell in the near future, and have been doing your Capital Gains calculations, it would be well worth a meeting with a Notaire first to find out what you can claim and what you can’t. You could be talking about a difference running into the high tens-of-thousands.
As a caveat to this, I would urge all of our English-Speaking artisans out there to produce your factures in French... this will be an enormous selling point for your business above your competitors!
Best Wishes,
