Any profit obtained from the sale of a property is taxable, and it is up to the Finance Department to determine which part of this amount constitutes an added value. As a rule, half of the capital gains obtained from the sale of real estate are subject to tax, but it all depends on how you reinvest this money.

In order not to be caught off guard, learn how to declare each amount, anticipating any accounts to be settled with the Tax Authorities. The annex to be filled in is G (or, in specific situations, G1).

How to calculate capital gains

What you earn from the sale of the house must always be mentioned in the income tax return for the year in which the sale took place. It should also indicate the value for which you had bought that house and the expenses you had with the transaction (for example, commissions paid to real estate agencies).

If an inherited property is involved, the “purchase amount” to be indicated corresponds to the tax asset value that that property had in the land register in the year in which it was transmitted by inheritance. Generally, this value is also referred to in the stamp duty document that the heirs received when they registered the transfer of the property in the Finance Department. If the property was inherited before January 1, 1989, you will not pay tax, but you must declare the transaction in Annex G1.

To the amount of purchase that the taxpayer indicates in the declaration, the Tax Authorities apply a monetary correction, so that the value makes sense nowadays, and that varies with the year of purchase. The remaining calculations are made by the Tax Authority.

In the “Expenses and charges” field, it is possible to indicate the charges that you may have incurred with the sale, such as commissions to the seller or the energy certificate, or even with eventual recovery works, such as the installation of a heating system, provided that carried out in the last 12 years. These expenses must be documented with an invoice issued in the name of the homeowner. Duly proven, they will be deducted from the capital gains.

Any expenses with subdivision permits are excluded. As the tax authorities do not consider them in the context of valuation, it cannot deduct them.

If you reinvest, you may not pay tax

Half of the capital gains obtained from the sale of real estate is subject to the payment of tax, unless the entire profit obtained is reinvested in the purchase of another house intended for permanent housing, which must correspond to the owner's tax address. In this case, you are exempt from paying tax on the capital gains obtained.

But the exemption also depends on the time between the purchase of the new house and the sale of the old one.

If you sell the house first, you have 36 months to buy another one and reinvest the profit you make. Until then, taxation of the surplus value is suspended, once the owner communicates to the Finance Department, through Annex G, the intention to apply the surplus value.

When the purchase of the new house becomes a reality, then, the Tax Authorities calculate the profit obtained and confirm the application of this amount in the purchase of new housing. However, you must ensure that the new house officially becomes the family's permanent home within 48 months of the sale of the old house.

If, on the other hand, you first buy the new house, you can sell the old one within the next 24 months and inform the tax authorities that the money obtained from the sale was channeled to the property you had purchased.

You only have to declare the sale and purchase values ​​in the year in which you sell the property. At that time, it also declares that part of the amounts was paid using credit (if applicable), so that the profit obtained can be accurately determined.

When the sale of a house gives rise to the purchase of land for construction or expansion of a property, it is still mandatory to apply for registration in the land matrix. You have 48 months to do so after the sale of the previous house and one more year (five years in total) after the sale for the new property to be declared as the household's own and permanent housing.

If not all of the proceeds from the sale of the house are used to buy a new home, this is considered a partial reinvestment. In this case, the tax authorities will calculate that part of the income obtained from the sale was reinvested in the new permanent home.

If you keep all the profit obtained from the sale of the property, the Tax Authorities will include half of that amount with the remaining income, regardless of its category.

Let's take as an example an apartment bought for 80 thousand euros, later sold for 145 thousand euros. The difference between the two amounts is €65,000, so the maximum taxable gain is €32,500. The tax is calculated on this amount, taking into account your taxable income, and the rate is applied by brackets.

When the sale price is lower than the taxable book value

If the property is sold for less than the taxable equity value, you can prove it to the Tax Authority. This proof is provided by means of a request addressed to the Finance Director, presented during the month of January of the year following the sale, if the taxable equity value is already definitively fixed, or within 30 days after the date on which the valuation became final.

The application must include all documents relevant to the analysis, such as a copy of the deed of purchase and sale, copy of any advertisements used to put the property up for sale, bank information, etc.

If you do not prove it, the taxable amount will be based on the taxable equity value, which will be reflected in the increase in capital gains.

Over 65s exempt from capital gains

Pensioners or taxpayers over 65 years old at the time of sale of the property may be exempt from the payment of capital gains. To do this, they have to reinvest the money from the sale in a Life Insurance financial insurance contract or in an open pension fund that guarantees a regular periodic income.

This is also valid if the reinvestment consists of contributions to a public capitalization scheme, which includes retirement certificates, within six months of the transaction.

The rule applies not only to the taxpayer himself, but also to the spouse or common-law partner. It is still mandatory to maintain the application for ten years.

With the exception of retirement certificates, the redemption of these products will always have to be done on a periodic rent basis, with an annual limit of 7.5% of the total invested.

Font: Deco