French Wealth Tax OUT, French Property Wealth Tax IN

L’impôt sur la fortune (ISF) Becomes L’impôt sur la fortune immobilière (IFI)

Since January 2018, the scope of the French wealth tax has been reduced to cover only real estate assets and real-estate investments. Previously, all non-business assets, including investments, were included in the calculation. Despite the reduction, the tax remains a unique French exception.

What is Liable to the New Property Wealth Tax?

If your household’s worldwide property estate is valued at over €800,000, you are liable to an annual Property Wealth Tax at the rates outlined below. Discounts and exceptions may apply.

Taxable Assets:

The assets liable under the Real Estate Wealth Tax include:

1. Your main residence, as well as second homes, land, and rental property.
2. Shares held in French property companies, called sociétés civiles immobilières (SCI).
3. Shares in property funds such as SCPI (sociétés civiles de placement immobilier) and OPCI (organismes de placement collectif en immobilier), including those held via an Assurance Vie policy.
4. Shares in companies up to the value of their property, where you hold at least 10% of the equity.

Resident vs. Non-Resident Taxation

• Residents: If you live in France, the entirety of your worldwide real estate assets and investments are taken into account for the purposes of the tax.
• Non-Residents: If you do not live in France, only real estate assets located within France are considered, subject to any tax treaties between France and your home country.

There is an exemption from the tax on foreign assets for the first five years for those who become residents of France. This applies irrespective of nationality. During this period, you will only be liable for wealth tax on real estate assets located within France.

What Real Estate is Exempt?

Certain business property assets are totally exempt, provided the following conditions are met:

• The property is used for the exercise of a business activity.
• The activity is exercised by the owner or their partner.
• It is the main activity of the owner.
• The property or investment is necessary for the exercise of the business activity.

Additional Exemptions:

• Furnished lettings are exempt if the landlord is a registered professional landlord (rental income must exceed €23,000 annually and be greater than other professional income).
• Woodland or woodland investments are exempt at 75% of their value, though they must be declared at full market value.

Who is Liable to the New Property Wealth Tax?

As with household income tax, the worldwide real estate assets held by the entire household (i.e., husband and wife) are taken into consideration. However, adult children are liable separately for their own assets if they exceed €1.3m, even if they are part of your household for income tax purposes.

The tax does not apply to company or commercial assets, except for personal property held through a French property company (société civile immobilière, or SCI).

What Rates Are Payable?

The tax bands and rates of taxation for 2018 are as follows:

• €0 – €800,000: 0%
• €800,000 – €1,300,000: 0.50%
• €1,300,000 – €2,570,000: 0.70%
• €2,570,000 – €5,000,000: 1%
• €5,000,000 – €10,000,000: 1.25%
• Over €10,000,000: 1.50%

A wealth tax cap ensures that total taxes do not exceed 75% of income, a rule that applies only to residents.

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