Secondary residence taxation
Are you looking to buy a secondary residence? Groupe Mercure can offer tax advice.
What is a secondary residence?
In a fiscal sense, a “secondary residence” means any housing that is not your primary residence. You can only have one primary residence, whether you rent or own. So any other real estate you own is considered secondary for tax purposes.
Secondary Residence Taxation
A second house is subject to the housing tax calculated on the basis of the property’s rental value. An increase of 1 to 15%, specific to each municipality, may also be applied. As of 2015, municipalities that tax vacant properties can also implement a 20% increase on the share of the housing tax contribution they receive for secondary residences.
- if the secondary residence is used for business activity
- if the persons living in the property are waiting to be placed in a retirement home or other specialised institution
- if the owners want to live in the house, but are unable to (e.g. expatriates)
Calculating the capital gain on a secondary residence
Capital gains earned on secondary residences are taxable at a rate of 19%, excluding social security contributions. You can use the tax authority website to calculate this online and find out how much you will be taxed.
The secondary residence capital gain tax concerns 100% of the property if it is sold less than six years after its purchase. It will then vary based on the term of ownership. Any property owned for between 6 to 21 years before being sold will receive a reduction of 6% per year, which decreases to 4% for the 22nd year. No further tax is due after 22 years of ownership, only social security contributions.
Social security contributions in the resale of a secondary residence
In addition to the capital gains tax on a secondary residence, there are social security contributions, including the Generalised Social Contribution (CSG) and the Social Debt Reimbursement Contribution (CRDS) together totalling 15.5%, with no possibility of deducting the CSG from your income. Only owners of who have owned their secondary residences for more than 30 years are exempt from the CSG-CRDS.