Fiscal Agents and Non-Residents
27th March 2023
Demands are growing to ease the rules on capital gains tax assessments.
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In the sale of property in France, for those who are France or EEA resident, the notaire acts as the tax collector for capital gains tax. They determine whether there is a liability, and calculate the amount due, which is then deducted from the sale proceeds.
However, for non-EEA residents, with few exceptions, the law requires that a tax agent is appointed to undertake the assessment.
These tax agents (représentant fiscal) are private sector companies accredited by the government. There are only 9 of them, several in the same ownership.
As the tax agents are personally responsible for any errors made in the calculation of the tax, they adopt stringent rules regarding deductions for building works carried out on the property.
Perhaps the most severe of the requirements is that the seller provides bank statements confirming that the sum stated on the invoices presented was actually paid.
That may not be any great stretch for recent works, but there is no time limit on just how far back the statements must be supplied.
So, if a seller seeks a reduction in tax for works undertaken 20 years previously, unless a bank statement is provided, showing the invoice was paid, no deduction for the works will be granted by the agent.
This requirement applies despite the fact that the conservation period required in law for bank statements is 5 years.
The administrative doctrine that governs the process makes no allowance for the passage of time, merely stating that: 'Seules les dépenses ayant fait l'objet d'un paiement effectif de la part du cédant sont retenues', ie, proof of actual payment is required.
Over the years we have become aware of many sellers who have been caught by this rule, landing up facing a higher capital gains tax bill.
In a recent case, a seller sold a property which they had owned since 2005. On presenting the invoices for works to the notaire, a quick informal calculation established that they had no capital gains tax to pay.
However, without consultation with the seller (itself a breach of the rules), the notaire engaged a tax agent to undertake the statutory assessment, following which the couple were presented with a capital gains tax bill of nearly €55,000.
In addition, the agent advised that a further €35,000 of the proceeds of the sale would be held back in escrow until they had received confirmation from the UK tax authority of their affiliation to the UK social security system, which granted relief against social charges.
The tax agent also presented them with a bill for €2,500, being their fees!
In other cases, the sums were sometimes even higher, not infrequently resulting in a net loss after payment of the taxes. In one case, a property owner who spent hundreds of thousands of euros on a property, was only granted a small tax deduction for the works.
All tax agents act in a similar manner, save some who are willing to consider other evidence, such as a sworn statement from the building company who carried out the works. The level of the fees also varies.
If a change in the law is to come about it will require that those who have been impacted by it to make a complaint.
It is possible to lodge a formal complaint to the tax ombudsman, the Médiateur des ministères économiques et financiers. We are aware of several such complaints made in the past, but the view of the ombudsman on this issue has yet to be made public.
You can read more about tax agents in our Guide to Fiscal Representation for Non-Residents
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