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Currently exempt from real estate capital gains tax, the sale of a primary residence could become taxable. A newly passed amendment aimed at combating speculation ties the exemption to a minimum holding period.
A capital gain arises when the selling price of a property exceeds its purchase price. Such gains are subject to two types of taxation :
- Income tax, at a rate of 19% ;
- Social contributions, at a rate of 17.2%.
This totals 36.2% in taxes. However, the General Tax Code allows for a holding period-based deduction on both taxes. To qualify for a full exemption from income tax, the property must be held for at least 22 years. For full exemption from social contributions, a 30-year holding period is required.
Currently, only capital gains from the sale of secondary residences and rental properties are taxable. Primary residences and their outbuildings are exempt from capital gains tax, regardless of how long they’ve been held.
A new amendment may alter this tax advantage for homeowners of primary residences. Proposed by Socialist deputies Peio Dufau and Inaki Echaniz during discussions on the 2025 Finance Bill, it "suggests conditioning the exemption on a holding period of at least five years as a primary residence." In other words, homeowners would need to occupy their property as their primary residence for five consecutive years to benefit from the exemption when selling.
According to the deputies, the goal of this measure is to combat "speculative flips," where properties declared as primary residences are bought and sold within a short period to pocket tax-free gains. Essentially, these individuals act as property dealers without bearing the associated tax burden.
This practice exacerbates housing pressure in tourist areas and attractive cities, where many residents struggle to find housing or acquire property. Additionally, it contributes to rapid price increases, as seen, for example, in the Basque Country.
The amendment includes provisions for situations where the holding requirement would not apply :
- When the sale of the primary residence is followed by the purchase of another primary residence. This prevents non-first-time buyers from being disproportionately affected by the new measure ;
- If the sale is due to professional relocation, long-term hospitalization, entry into a nursing home, death, or separation.
These exceptions significantly limit the amendment's practical scope. In its current form, it may fail to achieve its intended impact. The proposed text does not prevent speculators from continuing successive buy-and-sell strategies while claiming the primary residence exemption. It is also worth noting that the tax administration already has legal tools to challenge exemptions. If it can prove that buy-and-sell activities are speculative and habitual, they qualify as fraud.
In such cases, the seller faces heavy penalties, including income tax and social contributions on the capital gains, surcharges (40% to 80% of the taxable base), and late payment interest.
Source : publicsenat.fr
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