Levy on Capital Gains of Non-Residents Under Article 244 bis A CGI

Capital Gains Taxation Realized by Non-Residents: Juridical Foundations and Applicable Regimes Per Bilateral Conventions

The taxation regime in France of capital gains realized by non-resident natural or legal persons constitutes a major French international tax issue. When a non-resident sells French real property or French company securities, questions arise regarding France's right to tax this gain and the taxation rate, answers depending jointly on the transferred property nature, the transferor status (passive investor or professional operator), the applicable double taxation prevention convention, and provisions of French internal law, in particular Articles 4 A, 164 A and 164 B of the French Tax Code (CGI) for the territoriality principle and the identification of French-source income, and Article 244 bis A CGI for the levy on real-property gains.

French Supreme Administrative Court (Conseil d'État) jurisprudence has provided major constitutional and legal legitimacy clarification regarding the levy regime applicable to non-resident capital gains under Article 244 bis A CGI, establishing fundamental principles that this levy does not contravene non-resident taxpayer fundamental rights provided it meets substantial equity conditions and tax credit or relief mechanisms are subsequently available preventing inequitable double taxation.

Non-Resident Taxation Legal Foundation: Articles 4 A, 164 A and 164 B CGI

Article 4 A of the French Tax Code (CGI) provides that persons whose tax domicile is located outside France are subject to income tax only on their French-source income. Article 164 B lists the principal categories of French-source income, while Article 164 A provides that those French-source items are determined under the rules applicable to income of the same nature received by French tax residents, subject to the non-deductibility of global-income deductions. This territoriality principle limits French taxing jurisdiction over non-residents, subject to specific levies, withholding regimes and applicable tax treaties.

French-source capital gains must be analysed by asset category and by reference to the applicable treaty. Gains from French real property are generally taxable in France through the Article 244 bis A levy. Gains from securities of French companies are not governed by Article 244 bis A merely because the issuer is French; France's taxing right depends on the specific domestic-law provision potentially applicable, such as Article 244 bis B for substantial participations or rules for real-estate-rich entities, and on the applicable double-tax treaty.

Real Property Gains Regime: Mandatory Levy Under Article 244 bis A and Normalized Taxation Rates

For non-resident capital gains on French real property sales, Article 244 bis A CGI establishes a mandatory levy (prélèvement) at a flat rate of 19% for natural persons, plus applicable social levies depending on the seller's social-security affiliation. The 75% rate attached to non-cooperative States must not be mechanically linked to Article 244 bis A in its current wording; it may arise under separate regimes, including Article 244 bis B under statutory conditions and subject to legal exceptions. Specifically, for non-residents affiliated to a social security scheme of another EU/EEA State or Switzerland, only the solidarity levy of 7.5% may be due in accordance with the applicable case law and domestic rules. The applicable rate of social levies for other categories of non-residents depends on the legislation in force at the date of the transaction and should be verified with a tax advisor.

This real property gain remains subject to the mandatory levy under Article 244 bis A CGI, requiring the notary (notaire) to collect an amount equivalent to nineteen percent of the net capital gain (plus-value nette, i.e. sale price minus acquisition price and allowable costs, after holding-period allowances where applicable) and remit this amount to France's Treasury upon registration of the deed or, failing that, within one month following the transfer. This constitutes a strict administrative obligation whose non-compliance generates increased penalties and late payment interest at the rate of zero point two zero percent per month (Article 1727 CGI).

Securities Gains Regime: Fundamental Distinction Between Convention Regimes

For capital gains non-residents realize on French company securities sales (shares, SARL interests, etc.), the taxation regime remains variable and crucially depends on the double taxation prevention convention between France and the transferor's residence country per these conventions' general provisions applicable to the capital gains chapter. Numerous conventions recognize the residence country a priority or exclusive taxation right on securities gains, while others permit source country concurrent or exclusive taxation per securities nature or holding duration.

As illustration, numerous Franco-foreign conventions applying the OECD convention model grant exclusively to the transferor's residence country the right to tax capital gains on company securities sales, unless the transferor constitutes a professional having exercised commercial activity in the source country and linked this professional activity to the transferred securities. This residential approach reflects international acceptance that simple passive investors holding securities create insufficient economic presence justifying source taxation.

Articulation with Double Taxation Prevention Conventions: Tax Credit and Deduction Mechanisms

When France taxes non-resident capital gains under its internal law and the residence State also claims taxing rights, double taxation is addressed by the applicable treaty and the domestic law of the residence State. Depending on the treaty, the residence State may grant an ordinary foreign tax credit limited to its own tax attributable to the same income, exempt the income with or without progression, or apply another treaty-specific method. The mechanism must therefore be checked treaty by treaty; it should not be described as a uniform credit equal to French tax.

Practical Cases: Implications for Different Non-Resident Categories

For a Swiss non-resident selling French SARL interests, the Franco-Swiss convention in force generally grants residence country (Switzerland) exclusive capital gains taxation right, unless the partner exercises continuous commercial activity in France linked to these interests. Consequently, France will not assess this capital gain if the transferor remains non-resident in France and not subject to French professional tax.

For a Luxembourg non-resident selling France-located property, the Franco-Luxembourg convention recognizes France priority taxation right on real property gains, so France will assess this gain per its internal regime (nineteen percent plus social levies), with Luxembourg tax credit available for paid French taxes, this credit generally being applicable without formal limitation.

Procedural Aspect: Levy Collection Obligation and Administrative Formalities During Cross-Border Transactions

Under Article 244 bis A CGI, the notary (notaire) handling the sale of French real property by a non-resident is responsible for calculating the net capital gain, collecting the levy of 19% on that gain (plus applicable social levies), and remitting the amount to France's Treasury upon registration of the deed or, failing that, within one month following the transfer. This levy applies to the net gain (sale price minus acquisition price and allowable costs, after holding-period allowances), not to the gross sale price. The notary's obligation to collect and remit the levy constitutes a strict administrative requirement whose non-compliance generates penalties and late payment interest.

For securities gains not subject to the Article 244 bis A levy, the French filing and payment position must be determined under the specific domestic-law provision, the nature and level of the participation, the status of the company whose securities are sold, and the applicable treaty. It should not be assumed that every securities gain realised by a non-resident is reportable or taxable in France merely because the issuer has a French connection.

Refund Mechanisms and Reclamation for Excessive Levy

Where the levy under Article 244 bis A was collected on a gain and the non-resident taxpayer subsequently demonstrates that a loss actually resulted or that the gain was overstated, the non-resident taxpayer's right to a refund of the excess levy is recognized in principle. However, procedural contention to obtain this refund proves extremely laborious and requires contentious claim introduction within the applicable limitation period following assessment notification, substantiated by complete documentation proving the loss. Consequently, numerous non-residents prefer accepting loss rather than engaging expensive contentious procedure.

Legal Optimization Strategies: Gain Structure for Minimizing French Taxation

To minimize non-resident French property sales fiscal impact, several legal strategies may be explored: deductible expenses and acquisition costs may substantially reduce taxable gain if these expenses are precisely documented; transaction postponement when more favorable double taxation convention timing might apply may generate considerable tax savings; French holding or specially-created entity interposition holding property may modify applicable taxation regime per applicable convention criteria; progressive sale structuring by tranches may permit better taxation management than single sale, although this approach attracts more administrative examination.

Frequently Asked Questions Regarding Non-Resident Capital Gains

I am Swiss resident and sell my shares in a French SARL. Am I taxable in France?

No, generally. The Franco-Swiss convention grants French company securities gains taxation right exclusively to Switzerland, unless you exercised permanent commercial activity in France linked to these shares or held control participation (>25%). France will not therefore assess your gain. On the Swiss side, capital gains on movable assets (including shares) realized by private individuals in the course of private wealth management are generally exempt from Swiss income tax; only gains realized by professional securities traders (commerçants professionnels de titres) are taxable. Verify your exact participation status and consult a tax attorney before sale to confirm the applicable regime.

If I sell French real property as a non-resident, how does the Article 244 bis A levy work?

The notary (notaire) handling the transaction is obliged to calculate the net capital gain (sale price minus acquisition price and costs, after holding-period allowances), collect the levy of 19% on this net gain (plus applicable social levies), and remit the amount to France's Treasury upon registration of the deed or, failing that, within one month following the transfer. The levy applies to the net gain, not the full sale price. You may claim a refund if you demonstrate that a loss resulted or that the gain was overstated, but this procedure is lengthy and requires substantiated documentation.

May I reduce the 19% levy under Article 244 bis A by invoking a double taxation convention?

The 19% rate under Article 244 bis A CGI is established by French internal law and applies as the standard rate for non-resident natural persons. The applicable bilateral convention may provide a tax credit mechanism in your residence country for the French levy paid, but the rate of the levy itself is determined by French law. Deductible acquisition costs and holding-period allowances may reduce the taxable base and thus the amount of the levy.

What taxable base applies to the levy: gross or net property price?

The 19% levy under Article 244 bis A applies to the net capital gain (sale price minus documented acquisition costs and deductible expenses, after holding-period allowances where applicable), not to the gross sale price. The mortgage balance is irrelevant to the taxable base calculation — it is a financing debt, not an acquisition cost. Precise taxable base depends on the transaction structure and documented acquisition costs. Consult a tax attorney before the transaction to clarify the exact taxable base calculation.

Interaction Between the Article 244 bis A Levy and Bilateral Tax Conventions

The 19% levy under Article 244 bis A CGI on real property gains is established by French internal law and is not, as such, reduced by bilateral tax conventions. Most conventions to which France is party follow the OECD Model (Article 13 §1), which preserves the source State's right to tax real property gains without capping the rate. The convention's role is instead to provide for the elimination of double taxation in the residence State, typically through a tax credit mechanism: the residence country grants credit for the French levy paid, within the limit of the residence country tax attributable to the same income. For securities gains, the applicable convention may limit or exclude France's right to tax, depending on the nature of the participation and the specific convention provisions. Non-residents should systematically verify the applicable convention provisions and ensure they hold the requisite documentation (certificate of residence, tax identification number) to claim convention benefits in their residence country.

Practical Filing Strategies Following the Levy: Refund Claims and Administrative Relief Procedures

After the levy under Article 244 bis A is collected on a non-resident's real property gain, establishing procedures for obtaining refunds of excessive amounts becomes crucial for protecting the taxpayer's interests. The non-resident may claim refund of the levy in excess of actual tax liability by filing a formal claim (réclamation contentieuse) with the French tax administration within the applicable limitation period. Such claims require comprehensive documentation: proof of the levy collected, the sale documentation, acquisition cost evidence, and calculations demonstrating actual loss or reduced gain justifying refund. Professional tax advisors experienced in French administrative procedures substantially increase claim success probability and reduce time required for resolution. Additionally, some treaty countries provide administrative assistance mechanisms allowing non-residents to obtain relief within their residence country jurisdiction rather than through direct French claims, particularly for residents of countries maintaining mutual assistance agreements with France.

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