Capital Gains Tax on French Land Sales: Calculation Guide

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Are you about to resell a piece of land you bought some years ago or inherited from a loved one? If you realise a capital gain on the sale, you want to know how it will be taxed. Winter Immobilier walks you through the different situations based on the land use, its zoning, and how you acquired it.

What is the capital gain on building land?

The capital gain on a building plot is the positive difference between the resale price of a buildable land and its purchase price (or estimated value at the time of inheritance). It is not uncommon for building land to appreciate over the years. A landowner can therefore realise significant capital gains by reselling a building plot whose value has risen since acquisition. Treated as income, the capital gain is taxed by the French state, under income tax (IR) and social contributions.

A lower tax rate on land sale capital gains

The French government started in 2018 to lower the tax on real estate capital gains tied to building land sales. The aim is to encourage construction of new housing and curb the steady rise of property prices, by pushing landowners holding building plots to sell. An allowance of 70 to 85 % can therefore apply to capital gains on building land sales in specific cases:

• The land is located in zones A or A bis, which correspond to the tightest housing markets in the country
• A unilateral promise of sale was signed before the sale between early 2018 and the end of 2020
• The sale is completed by the end of the second year following the promise of sale, that is by the end of 2022
• The deed of sale must mention the buyer's commitment to build housing on the land within 4 years of the purchase date

Exemptions depending on the type of land

Non-buildable land, working agricultural land, and land acquired through inheritance or as a gift are specific cases with different exemption conditions.

Exemption on a non-buildable land capital gain

No specific exemption or allowance applies to the capital gain on a non-buildable land, unless it is sold for less than €15,000, sold in the context of a public utility expropriation, or the capital gain is less than 10 times the purchase price. The exemption also applies to sellers whose non-buildable plots became buildable before 13 January 2010 following a change of the local urban plan (plan local d'urbanisme, PLU).

Exemption on an agricultural land capital gain

When selling agricultural land, the capital gains tax depends on whether the land is part of the seller's private estate or business assets. If the land falls under the private estate, the usual real estate capital gains tax applies (36.2 %, with an allowance varying with the holding period). If the land is part of a farmer's business balance sheet, the seller is exempt from capital gains tax on the sale.

Exemption on an inherited land capital gain

Calculating the capital gain on inherited land or land received as a gift requires referring to the property's market value as estimated at the time of acquisition. To this value should be added inheritance duties, notary fees and registration fees. The acquisition price increased accordingly reduces the taxable capital gain.

The exemption conditions on inherited land are the same as for any other acquisition. In particular, owners who have held the land for 22 years are exempt from income tax. Exemption from social contributions kicks in after 30 years of ownership.

Winter Immobilier guides your land sale in Nice

Looking for more advice on land sales or the Nice property market? Get in touch with our estate agency in Nice Gambetta or reach one of our advisors directly by phone.