Exemption of Capital Gains on Sale of Main Residence

Newsletter - October 2021

In accordance with Article 150 U, II-1° and 3° of the French Tax Code, the capital gain made on the sale of a main residence and its appurtenances is exempt from tax, provided that all the conditions stipulated by law and laid down by the courts are met.


Definition of Main Residence

Main residence means the dwelling (house or apartment) that is the seller’s habitual and effective place of residence.

An habitual residence is one that is near the seller’s workplace and the children’s school, but also one for which effective occupancy as a main residence can be proved by utility bills.

Proof of effective occupancy may be provided by any means. Six months’ occupancy has been considered sufficient to benefit from the exemption (Douai Administrative Court of Appeal, 4 December 2019).


Occupancy at the time of Sale to be Exempt

In principle, the dwelling must be the seller’s main residence on the date of sale.

However, case law and administrative doctrine have allowed some flexibility in the application of this condition. Therefore, when the property has been occupied as a main residence until it was put on sale but is vacant on the date of sale, the exemption applies if the sale took place within a normal timeframe.

The tax administration considers a year to be a normal timeframe. The Conseil d’Etat has added that the maximum timeframe depends on the specific circumstances of each sale (CE, 6 October 2010).

Specific situations:

  • Property sold after separation or divorce: for the spouse or partner who remained in the property, the exemption applies. For the partner who moved out, the exemption may be sought under administrative doctrine. In this case, the following conditions must be met:
    • The dwelling was occupied by the former spouse or partner until it was put on sale
    • The sale takes place within a normal timeframe
  • Property under construction that is sold due to the transfer, disability or death of the seller or their spouse/partner: the exemption applies provided that the dwelling was intended to be the main home and the seller did not own the dwelling that they lived in during the construction.


Immediate and Necessary Appurtenances

Appurtenances of the main residence, which are also exempt if they are sold at the same time, include garages (within a one kilometre radius), parking spaces, passageways, courtyards, and all the land surrounding the property.

Specific point: the capital gain made on the sale of a part of the land as a building plot is not exempt.


Special Cases

  • Property owned in indivision: the share of the capital gain relating to the part of the building occupied as a main residence is exempt
  • Split ownership:
    • Sale by the seller holding the property in full ownership: the sale of the usufruct or bare ownership can benefit from the exemption
    • Sale by the usufructuary: the exemption can apply insofar as the building constitutes their main residence
    • Sale by the bare owner: the exemption does not apply

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