Brexit - Tax Representative on French Property Sales

UK residents are now required to appoint a tax representative on the sale of their holiday home in France.

Since the UK finally left the EU at the end of 2020, UK nationals not resident in France have ceased to benefit from the exemption to appoint a 'représentant fiscal' on the sale of French real estate.

The obligation arises irrespective of whether you make a loss or a gain on the sale of the property.

The process is often very opaque and expensive for sellers, who need to be alert to it and to act with caution.

French laws require that certain non-resident sellers are obliged to appoint a représentant fiscal (tax agent) on the sale of property in France.

Separately, it also applies to certain commercial activities undertaken by foreign based companies.

The role of the tax agent is simply to verify that the correct amount of tax is being paid on the transaction.

Given that this also happens to be the role of the Notaire there does seem to be a degree of duplication in this task!

Who is Liable?

It applies to all non-residents from outside of the EU.

Since 2015, following a judgement in the European Court, EU residents, as well as residents from Iceland and Norway have been exempt.

Since 1st January 2021, UK non-residents have no longer be exempt, due to Brexit.

The requirement to appoint an agent applies even though there may be a loss on the sale of the property.

How Much Does it Cost?

There are no fixed tariffs for this 'service' and very little transparency from tax agents about them. The charges are sometimes quite eye-watering.

Expect to pay around 0.4% to 1% of the selling price of the property.

Mercifully, the fee is deductible from the capital gain, although this is not of much use if you are selling at a loss (not uncommon).

Tax Agents/Représentant Fiscal

These tax agents are accredited private companies and, as they are relatively unknown to non-residents, they are frequently appointed by the notaire at the time the sale takes place, sometimes without the consultation or even the knowledge of the seller.

Notaires generally use a tax agent with whom they are accustomed to work, without any competitive process, so they may not be the cheapest or most appropriate agents for your sale.

That said, there are not many of these companies around, so the choice is limited. Whatever price you are offered, you should consider trying to negotiate on the price, particularly if the sale value of the property is high or the transaction is simple, eg no deductible building works, or capital loss.

There are several companies on-line who claim they are accredited but this is not the case. Some are only accredited for VAT, whilst others claim accreditation, but sub-contract the work to an accredited company. That results in an increased charge to you.

There is a huge lack of transparency about the way these companies operate, and you will find few details about their fees and practices on-line. In some cases not only does the agent charge a fee, but they also withhold a percentage of the proceeds of the sale in escrow, for several years, as a guarantee against fraud by the seller.

Unfortunately, as the tax agent is liable for any incorrect tax assessment that may be made, some take a most cautious view of the calculation. This is particularly relevant to deductions being sought for building works.

Some tax agents also have a very restrictive view of what are deductible, eligible building works. This is because not all building work is deductible from capital gains.

Notably not deductible are maintenance and repairs, including major repairs, with the administrative doctrine stating: 'Les dépenses d'entretien et de réparation, y compris les grosses réparations, ne figurent pas parmi les dépenses pouvant être prises en compte pour le calcul de la plus-value.'

As a result, it is imperative you have full and correct paperwork for the works. The invoices must be without error, eg, address, name. Use only the address of the French property on the invoices, not your home address in the UK. If you have used a builder not registered in France that is often a problem.

You should also keep proof of payment, which should be in the form of bank statements and invoices. Unless you have the bank statements to confirm payment, you will not get the relief. The supply of old bank statements is a particularly onerous requirement and one with which many owners are unable to comply. We consider the requirement excessive and one you should consider contesting with the tax authority. You can contact us on the mail address below about this issue.

The law does permit the buyer to act as the tax agent, provided they are France resident, but this is extremely rare, due to the contingent liability that arises for them.

In addition, any other third party who is France resident may do so, subject to accreditation by the tax authority, who will wish to be satisfied as to the guarantees they are able to offer. Notaires and avocats are expressly not permitted to act.