Transfer of real estate: what you need to know about the new criteria established by the Council of State.
The sale of real estate often raises complex questions, particularly regarding taxation. In March 2025, the Council of State issued two important decisions that redefine the conditions for taxing real estate transfers, providing major clarifications on how to calculate capital gains and the conditions for exemption for the primary residence.
These rulings from March 27, 2025, strengthen the requirement for documented evidence, requiring taxpayers to be more vigilant. Here’s a breakdown.
What the March 2025 Decisions of the Council of State Say
Partial Transfer of Real Estate: What Acquisition Value to Retain?
In its decision of March 11, 2025 (CE, 9th ch., no. 492334), the Council of State detailed the methods for calculating capital gains in the case of a partial sale of real estate.
From now on, two methods are recognized for determining the acquisition value of the portion sold:
- The purchase price stated in the notarial deed, provided it is broken down by part of the property;
- The market value at the time the property entered the estate, when justified by reliable documents (appraisal, estimate, etc.).
This flexibility allows for adjustments in common cases such as the division of land, as long as supporting evidence is retained or produced.
Concrete example: a plot of land purchased for €500,000 without breakdown is partially sold (20%) in 2025. The seller can, if they have an estimate from 2010, prove that this part was worth more or less than €100,000, which will determine the taxable capital gain.
Sale of the Primary Residence: Attention to Actual Occupancy
In another ruling from March 14, 2025 (CE, 8th ch., no. 474943), the Council of State reaffirmed that the exemption from capital gains on the primary residence strictly depends on the actual occupancy of the property at the time of sale.
It is not enough to have intended to live there or to have resided there for a time: real and continuous use is decisive.
Illustrative case: A homeowner buys a property to live in but quickly leaves for personal reasons. If the property remained vacant at the time of sale and without factual elements of occupancy (subscriptions, local taxes, mail, etc.), the exemption may be denied.
Increased Obligations for Real Estate Sellers
The Need to Retain Solid Evidence
These new rules impose an increasingly stringent requirement for documentary justification:
- For a partial transfer: a valuation estimate at the time of acquisition, or a clear mention in the initial notarial deed;
- For the primary residence: proof of continuous occupancy such as bills, taxes, and proof of residence.
A Direct Impact on Capital Gains Taxation
Capital gains on real estate are calculated based on the difference between the sale price and the acquisition price. The more documented and higher the acquisition value, the lower the capital gain, and thus less taxable.
Conversely, an unjustified exemption, particularly due to lack of proof of occupancy, can lead to retroactive taxation, penalties, and interest in the event of an audit.
Key Takeaways for Taxpayers
The decisions of the Council of State from March 27, 2025 illustrate the tax administration's desire to better regulate exemptions and prevent abuses. This invites taxpayers to:
- Anticipate and retain all documentation related to their property from the time of acquisition;
- Obtain an independent appraisal to objectively estimate the value at an earlier date (especially in the case of partial transfers);
- Provide concrete proof of occupancy to benefit from the exemption related to the primary residence.
These steps can be crucial in the event of a tax audit and can make the difference between an exempt capital gain and a costly tax.
Conclusion: Anticipate and Document to Secure Your Sale
By clarifying the rules regarding the transfer of real estate, the Council of State in March 2025 reminds taxpayers of the importance of written and tangible proof.
Whether you are considering selling a property in whole or in part, or whether your home is your primary residence, reliable and complete documentation becomes essential to optimize and secure your tax situation.
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Are you considering the transfer of real estate?
PRAX Avocats supports you in all stages of your sale to secure your tax obligations and avoid the inconveniences of a reassessment. Contact our firm today for a personalized audit of your financial situation.