Overseas Chambers of Peter Harris

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23. The effect of Brexit on sales of French properties by UK residents.

October 23rd 2019

Firstly, the tax rates and social charges will change on certain sales after the Brexit date, but worse, the notary will no longer be able to file the capital gains tax return for the non-resident vendor.

The followig analysis is siubject to any transitional ot implementation arrangements in the Withdrawal Agreement but more importantly the negotiations to follow under political framework statement of which the present version can be found here.

The following is subject to that, and the inevitable French inability to respect European Union rules in tax matters involving a European principle whioch is not on the face of it mandatory.

In principle, any sale completed after the Brexit date by a United Kingdom resident will need, after signature to be put through what is known as a fiscal representative who will vet and prepare the French capital gains return and submit it.  A few notaries might be prepared to take the risk of putting a simple and straightforward declaration through after Brexit during the period of adjustment, but that is by no means a reliable option. The same rule applied to Jersey, Guernsay and Isle of Man residents prior to Brexit, as they were not considered resident in an EEA state.

Whilst it is possible to negotiate which items are deductible from capital gains to arrive at the French chargeable gain, the function  of a fiscal representative is that of a quasi-functionary working with or rather on behak of the Tax Administration by whom they are licensed.

What is more there is an extra fee charged for this intervention.

A sale by an individual is one thing, however a sale by a non-resident company or by a French Société de personnes such as a non-trading Sarl or SCI is also subject to this procedure when there is a non-EEA resident associé, if you prefer member.

At at point, there is a difference of treatment where the company is trading or not, in other words whether it lets the property out. In that case, it should be possible to incorporate the capital in in the year-end declaration, but we will need to await legislative changes or confirmation from the French tax administration on Brexit to confirm that in each case. However as you should know, an SCI's or an Sarl's taxable results are calculated at the level of the company but then are chargeable to the non-resident member directly.

Certain Fiscal Representatives are more realistic than others, and may be prepared to argue on behalf of the vendor. However, they take the risk of being examined more closely as to their status as regulatory appointees.

It is essential to ensure that the window of opportunity is not lost, and that any sale negotiated is completed  before the United Kingdom officially leaves the European Union. Even the date of 31st October / 1st November is not fixed in stone.

If you have a query, please  contact Peter Harris for assistance in this area.

+ 44 1534 625879 or peter.harris@overseaschambers.com