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their second home for summer. They carried out
more than €300,000 of works.
Some of the works was carried out by themselves
and the rest by a company. The invoices issued
by the company also do not comply with the
regulations (wrong VAT regime for the works,
missing SIRET number, nature of the works not
detailed).
In 2023, they sell the property for €250,000.
They think they have a capital loss of €100,000
when in fact the taxable capital gain base is
€250,000 - €61,250 = €188,750 of gross capital
gain before allowances. Even with 13 years of
ownership, the capital gain base is significant:
they will have to pay €46,289 in income tax and
social security contributions, as well as a surtax
on a base of €98,150.
Contrary to what they had planned, the tax
representative - who is obliged to do so because
Mr. and Mrs. Smith are tax residents in the UK
- will refuse to deduct the works. Compared to
the significant works carried out (€300,000),
only the fixed price for the works allows them to
reduce the capital gains base with only €7,500
of works taken into account.
What we recommend
- Contact a tax advisor in the pre-project phase:
each situation is different, and the tax aspect
must be integrated into your project beforehand.
- Regarding the works:
o Avoid carrying out these works yourself if
you intend to resell before the total exemption
for the period of ownership.
o Keep all your invoices carefully and check
that they are correct (SIRET, intra-community
VAT number, type of work).