French Viager Sales: Capital Gains Tax Calculation

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Follow this guide on capital gains tax for viager sales and discover the exemption rules that apply.

What is a viager capital gain?

A capital gain (plus-value) is the positive difference between the purchase price and the resale price of the same property. A negative difference is a capital loss. Treated as income, real estate capital gains in France are typically subject to income tax (IR, impôt sur le revenu) and social contributions (prélèvements sociaux).

The case of a viager sale is specific because the viager contract involves the buyer (débirentier) paying a regular annuity to the seller (crédirentier) until the seller's death. Several scenarios apply, including the seller selling their own property under a viager contract and the buyer reselling the property before the seller's death.

How is a viager capital gain calculated?

Calculating a viager capital gain always requires estimating the property's market value at the time of the relevant sale, but also the total of the annuity payments actually made to the seller, which can differ from the property value. Here are the three main resale scenarios.

Resale after the seller's death

This is the simplest case. After the death of the crédirentier, the buyer's acquisition cost is straightforward, equal to the bouquet (lump sum paid at the time of purchase) plus the total annuity payments made until the seller's death. When the buyer, now full owner, resells the property, a capital gain is realised if the resale price exceeds the total of the bouquet plus the annuity payments.

Capital gain at the time of the viager sale

When a person sells their property under a viager contract, they may realise a capital gain. It is calculated at the moment of the transaction, based on the acquisition price of the property and the price set in the sale deed for the viager transfer (bouquet + capitalised value of the annuity). The market value defined for the property at the time of the viager sale serves as the basis for the gain calculation. Regardless of how long the annuity is actually paid (shorter or longer than the life expectancy estimated by INSEE and insurance actuaries), the capital gain is calculated on the initial value of the annuity.

Resale during the viager period

If the buyer (débirentier) decides to resell the property while the seller is still alive, the capital gain calculation is based on the bouquet plus the annuity payments made up to the resale date. It is possible, and advantageous tax-wise, to ask that the property's full market value be taken into account in the taxable gain calculation. The gain is then reduced because the difference between purchase and resale prices is smaller.

How is a viager capital gain taxed?

The viager capital gain follows the general rules of French real estate capital gains tax, meaning it is subject to income tax in the year of resale and to social contributions. Several conditions can grant a partial discount or a full exemption.

Available exemptions on a viager capital gain

As with any real estate capital gain, the viager capital gain is fully exempt if the property is the seller's primary residence. If the property is the seller's secondary residence, the exemption applies after more than 22 years of ownership.

This can happen when the seller is the former buyer (ancien débirentier) or the crédirentier. In that case, the seller must also not have owned a primary residence in the four years preceding the sale and must reinvest the sale proceeds into a primary residence within four years.

Below 22 years, the holding period grants a tapered allowance on both the income tax rate and the social contribution rate. Other available exemptions include:

• The sale of a property at a price below €15,000
• A retired seller with reference taxable income below €11,098
• The case of a non-resident seller

Winter Immobilier guides your viager sale in Nice

Looking for more advice on viager 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.