Capital gains on securities held by non-residents: in which cases does France impose taxes?

A non-resident for tax purposes is generally not taxed in France on capital gains from the sale of securities. The exception concerns substantial shareholdings: having held, alone or with your family group (spouse, ascendants, descendants), at some point during the last five years, more than 25% of the rights to profits in a company subject to corporation tax and headquartered in France. In this case, the capital gain is subject to a levy of 12.8%. The rate is 75% if the beneficiary is domiciled in a non-cooperative state or territory (as defined in Article 238-0 A of the French General Tax Code, subject to its exceptions), regardless of the percentage of rights held.

This page explains the rule, the exception, and the rate, and mentions the special case of real estate. It is intended for individuals.

The principle: no taxation in France

Individuals who are not tax residents of France are generally not taxed in France on the sale of securities. This principle is based on Article 244 bis C of the French General Tax Code.

It is a direct consequence of non-resident status. Before considering a sale, it is therefore essential to have unambiguously established that one is a non-resident. This is the purpose of the page on the three criteria of Article 4 B, which reiterates that only one criterion is sufficient to be considered domiciled in France.

The exception: substantial participation

The principle ceases to apply if you have held, alone or with your family group (spouse, ascendants, descendants), at any time during the last five years, more than 25% of the rights to the social benefits of a company subject to corporation tax and headquartered in France. The relevant legal texts are Articles 244 bis B and 164 B f of the French General Tax Code.

Three conditions must be met:

1. A threshold. More than 25 % of the rights to the company's profits, held by yourself and your family group (spouse, ascendants, descendants).
2. A period. The detention took place at some point during the last five years.
3. A French company. It is subject to corporation tax and its headquarters are in France.

The most easily overlooked aspect of this period is the holding period. Simply being under 25% of the taxable income on the day of the sale isn't enough; the test covers the five preceding years. Nor is it sufficient to consider only your own holdings: those of your spouse, ascendants, and descendants are included in yours.

The sample: 12.8 %, or 75 %

Capital gains on substantial shareholdings held by non-residents are subject to a levy of 12.8% (%). This levy is payable upon registration of the deed or, if registration is not completed, within one month of the transfer, under the responsibility of a designated representative. The capital gain is included in the calculation of the reference taxable income.

If the beneficiary is domiciled in a non-cooperative state or territory (as defined in Article 238-0 A of the French General Tax Code, subject to its exceptions), the rate is 75% of the taxable income, regardless of the percentage of rights held. This increased rate therefore does not require exceeding 25% of the taxable income.

These rates apply to individuals. The rate applicable to companies is not covered on this page.

Situations in a table

Before a sale: questions to ask

The rule can be read in five checks, in this order:

• Is the beneficiary of the capital gain domiciled in a non-cooperative state or territory? If so, the rate is 75 %, regardless of the percentage held.
• Are you indeed a non-resident for tax purposes on the date of the transfer?
• What share of profit rights did you and your family group (spouse, ascendants, descendants) hold at each time during the last five years?
• Is the company subject to corporation tax, and is its headquarters in France?
• Are the securities those of a French real estate-focused company? If so, a different regime applies.

Numerical example (fictitious profile)

Situation. Sophie, 58, lives outside France and is no longer a tax resident there. She has long held 30 shares of the profits of a French simplified joint-stock company subject to corporate income tax; her family group holds no shares in it. She plans to sell her shares for a capital gain of €400,000.

Issue. Sophie believes that being a non-resident protects her from French capital gains tax. However, her stake exceeds 25 %.

Strategy. Check the ownership of the shares and those of the family group over the last five years, the company's registered office and tax status, and the beneficiary's address, before setting the transfer date.

Result. With 30 % of the profit rights, Sophie has a substantial stake. The deduction of 12.8 % on €400,000 amounts to €51,200.

If Sophie were domiciled in a non-cooperative state or territory, the rate would be 75%, or €300,000 on the same capital gain. It would be the same even with a stake of less than 25%, since this rate does not depend on the percentage held.

Conversely, another non-resident shareholder of the same company, not domiciled in a non-cooperative State or territory, who has never exceeded 25 % over the last five years, with his family group, falls under the principle of non-taxation in France.

This profile is fictitious. The figures illustrate the mechanism and do not represent a real case.

For the record: real estate falls under a different regime

Capital gains on real estate held by non-residents, and on shares in companies whose assets are predominantly French real estate, are subject to a levy of 19% (Article 244 bis A of the French General Tax Code). These should not be confused with securities.

For real estate, the tax authorities also outline a specific rule regarding social security contributions. Since January 1, 2019, non-residents affiliated with a mandatory social security scheme in the European Economic Area or Switzerland are exempt from CSG and CRDS contributions on their French-source real estate income and capital gains. The 7.5% solidarity levy (%) remains payable. Affiliation is assessed as of December 31 of the year in which the income is earned. This paragraph applies only to real estate.

What changes depending on your situation

• Your ownership percentage, along with that of your family group (spouse, ascendants, descendants), at every time during the last five years, not just at the date of the sale.
• The nature of society : corporate tax, registered office in France, real estate activity or not.
• The beneficiary's country of residence : if it is a non-cooperative state or territory, the rate is 75 %, regardless of the percentage held.
• Non-resident status, which must be established before any analysis of the transfer.