22.10.2015

Capital gains on real estate: extension of the 30% allowance on land with buildings

Following a review of Article 4 of the Finance Law 2015 in its first reading at the National Assembly, providing in II for an exceptional allowance of 30% solely applicable, for determination of net tax liability, to capital gains tax on transfers of “building land as defined in 1° of 2° of I of Article 257 of the General Tax Code relating to it”, for a period of 16 months, from September 1st 2014 to December 31st 2015, the Deputies (MPs), at the initiative of Deputy Goldberg, adopted, against the government’s advice, an extension of the 30% allowance on land with buildings intended for demolition for the purpose of building new accommodation.
Application of this exceptional allowance is subject to several conditions, ie:
° the buildings must be located on a commune with over 50,000 inhabitants, subject to the tax on vacant housing;
° the transferee is required to undertake, as per a statement in the deed of acquisition, to demolish the existing construction(s) with a view to rebuilding premises intended for living accommodation within a period of four years as from the date of acquisition;
° the transfer must be made before December 31st 2017, on condition that it has been instigated by means of a promise of sale clearly dated between January 1st and December 31st 2015.
NB – In the event of non-fulfilment of this undertaking, the transferee will be obliged to pay a penalty in an amount equal to 10% of the total price of the sale.

Article 4 of the Finance Law 2015
I – B of IV of Article 27 of Law N°2013-1278 dated December 29th 2013 on finances for 2014 is completed by the words: “occurring between September 1st 2013 and August 31st 2014”.
II – A – A 30% allowance is applicable on capitals gains, determined as per the conditions provided in Articles 150 V to 150 VD of the General Tax Code, resulting from the transfer of building land as defined in 1° of 2 of I of Article 257 of the same Code, or dues pertaining to it, on the double condition that the transfer:
1° Be preceded by a unilateral promise of sale or a synallagmatic promise of sale clearly dated from September 1st 2014 to December 31st 2015 at latest;
2° Be executed at latest by December 31st of the second year following the year in which the unilateral promise of sale or synallagmatic promise of sale was unquestionably dated.
The allowance mentioned in the first paragraph of this document A is also applicable to capital gains taken into consideration for determination of liability for contributions provided for in Articles L.136-7 of the Social Security Code and 16 of statute N° 96-50 dated January 24th 1996 relating to reimbursement of the social debt, levies provided for in Articles 1600-0 S of the General Tax Code and L. 245-15 of the Social Security Code, the additional contribution provided for in Article L. 14-10-4 of the Social and Family Action Code and, should it be applicable, the tax mentioned in Article 1609 etc. G of the General Tax Code.
B – A does not apply to capital gains resulting from transfers made for the benefit of a transferee if it concerns:
1° A private individual who is the spouse of the transferor, his partner tied by a civil solidarity pact or his publicly known concubine, or an ascendant or descendant of the transferor or of one of these persons;
2° A private individual whose transferor, his spouse, partner tied by a civil solidarity pact, publicly known concubine, ascendant or descendant of one of these persons is a partner or becomes a partner on the occasion of this transfer.
III – On condition that the transfer be preceded by a unilaterial promise of sale or a synallagmatic promise of sale unquestionably dated between January 1st and December 31st 2015, paragraph II of this Article also applies to capital gains realised in the case of sales of properties with buildings on them, on communes belonging to a continuous urban development zone with over 50,000 inhabitants, as defined in Article 232 of the General Tax Code. For application of the first paragraph of III herein, the transferee shall undertake, as per a statement in the authenticated deed of acquisition, to demolish the existing constructions with a view to building and completing premises intended as living accommodation whose floor area is equal to at least 90% of the maximum floor area authorized, in application of the regulations of the local urban development plan or the land use plan, within a period of four years from the date of acquisition.
In the event of non-fulfilment of this undertaking, the transferee will be obliged to pay a penalty in an amount equal to 10% of the sales price stated in the deed. In the event of a merger of companies, the undertaking made by the transferee shall not be broken when the acquiring company undertakes, in the act of merging, to take the place of the company being absorbed for fulfilment of the afore-mentioned undertaking within the period still to run. Non-fulfilment of this undertaking by the acquiring company will lead to imputation of the penalty applicable to the transferee.
IV – I and III enter onto force as of September 1st 2014. III enters into force as of January 1st 2015.