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.
Exemptions
– 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 Reimbursem*nt 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.
As an expert in real estate and taxation, my extensive knowledge in this domain enables me to provide valuable insights into the intricacies of owning a secondary residence. I've navigated the complexities of real estate regulations, taxation policies, and the evolving landscape of property ownership.
In the realm of secondary residences, it's imperative to understand the nuanced tax implications associated with them. A secondary residence, in fiscal terms, refers to any housing that is not your primary residence. The crucial point here is that an individual can only have one primary residence, whether it is rented or owned. Consequently, any other real estate owned is classified as secondary for tax purposes.
Now, let's delve into the concept of Secondary Residence Taxation. A second house is subject to the housing tax, which is calculated based on the property's rental value. Municipalities have the authority to impose an additional 1 to 15% increase, specific to each locality. Notably, since 2015, municipalities taxing vacant properties can enforce a 20% increase on the housing tax contribution for secondary residences.
However, exemptions exist for certain scenarios. If the secondary residence is used for business activity, if the property is inhabited by individuals waiting to be placed in a retirement home or specialized institution, or if the owners wish to live in the house but are unable to (e.g., expatriates), exemptions may apply.
Moving on to the calculation of capital gains on a secondary residence, it's crucial to note that these gains are taxable at a rate of 19%, exclusive of social security contributions. The tax authority website provides an online tool for calculating the tax and determining the amount to be taxed. The capital gain tax on a secondary residence covers 100% of the property if sold within six years of purchase. Thereafter, the tax rate varies based on the duration of ownership, with a gradual reduction from the 7th to the 22nd year.
In addition to capital gains tax, social security contributions play a significant role in the resale of a secondary residence. These contributions, encompassing the Generalized Social Contribution (CSG) and the Social Debt Reimbursem*nt Contribution (CRDS), amount to a total of 15.5%. Importantly, there is no possibility of deducting the CSG from income. Only those who have owned their secondary residences for more than 30 years are exempt from the CSG-CRDS.
In conclusion, navigating the tax landscape of secondary residences demands a comprehensive understanding of the regulations, exemptions, and varying tax rates based on ownership duration. Groupe Mercure, with its expertise, can offer invaluable tax advice to individuals contemplating the purchase of a secondary residence.
