Capital Gains on a Luxury Second Home
Unlike a primary residence, which is exempt indefinitely, the sale of a secondary residence—a villa, castle, or luxury apartment—remains subject to capital gains tax. For a high-value property, this mechanism should be considered well in advance of putting it on the market.
The overall rate and its calculation
Capital gains on real estate are taxed at 36.2%, divided between 19% income tax and 17.2% social security contributions. This capital gain is calculated on the difference between the sale price (less selling costs) and the purchase price, plus a flat rate of 7.5% for purchase costs and 15% for work carried out after five years of ownership — a flat rate that should always be compared to the actual expenses if they turn out to be higher, which is common for a luxury property that has undergone significant renovations.
Two abatements that do not follow the same rhythm
The progressive exemption mechanism distinguishes between income tax and social security contributions, with different rates of reduction. For income tax, the reduction begins after the 5th year of ownership at a rate of 6% per year until the 21st year, then 4% for the 22nd year—resulting in total exemption from income tax after 22 years. For social security contributions, the reduction is slower (1.65% per year from the 6th to the 21st year, then 9% per year until the 30th year)—fullexemption only occurs after 30 years. Between 22 and 30 years of ownership, only social security contributions remain due.
The surcharge, a point of vigilance specific to luxury goods
Since 2013, an additional surtax has applied to net taxable capital gains exceeding €50,000—a threshold frequently surpassed by transactions involving luxury properties. This progressive surtax is added to the overall rate of 36.2% and significantly increases the tax burden on the largest capital gains, with a smoothing mechanism to avoid abrupt threshold effects.
A reform that was considered, but ultimately rejected
An amendment passed by the National Assembly on November 3, 2025, proposed reducing the total exemption period from 22 to 17 years, with the aim of facilitating the second-home market. This amendment was ultimately not included in the 2026 Finance Bill : the current system (22 years for income tax, 30 years for social security contributions) therefore remains fully applicable. This issue, however, is likely to resurface in future budget debates—a point to monitor for any long-term ownership strategy.
Exemptions that do not depend on the duration
Several situations allow you to avoid property tax without waiting for ownership thresholds to be met. The most significant is the first sale of a property other than your primary residence, which is exempt if the seller has not owned their primary residence in the previous four years, provided they reinvest the sale proceeds in the purchase of their future primary residence within 24 months—a provision that can only be used once. Sales under €15,000 are also automatically exempt, a threshold assessed per seller (i.e., €30,000 for a couple holding joint ownership).
Anticipate before selling
For a high-end property, where capital gains can be substantial, a precise upfront simulation—incorporating the actual holding period, work justified by invoices rather than a flat rate, and potential eligibility for tax exemptions—often allows for the legally optimized sale timeline. The notary calculates and collects the tax directly at the time of signing; consulting a wealth management advisor beforehand remains the best way to anticipate this cost within the overall sales strategy.
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