L’impôt sur la fortune (ISF) – has now become l’impôt sur la fortune immobilière (IFI)
Since January 2018 the scope of the wealth tax has been reduced, to cover only real estate assets and (real-estate) investments, where previously all non-business assets, including investments, were included in the calculation. The tax though still remains a peculiar French exception.
What is liable to the new Property Wealth Tax?
If your household world-wide Property Estate is valued at over €800,000 then you are liable to an annual Property Wealth Tax at the rates quoted below, there are discounts and exceptions.
The assets that are taxable under the Real Estate Wealth Tax- are all real estate and investments in real estate.
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 held 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 held in companies up to the value of their property, where you hold at least 10% of the equity.
The assets that are included in the calculation will depend on whether you are resident in France.
Resident – If you live in France the whole of your worldwide real estate assets and (real-estate) investments will be taken into consideration for the purposes of the tax.
Non-Resident – If you do not live in France only real estate assets in France are considered, subject to the terms of any tax treaty between France and your home country.
There is an exemption from the tax for five years on foreign assets for those who become resident in France. The concession applies irrespective of nationality. Therefore for the first five years of you becoming resident in France (to the 31st Dec of the 5th year), you will only be liable for the wealth tax on those real estate assets located within France.
What Real Estate is exempted?
Business property assets are totally exempt, but only provided:
• They are used in 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/investment is necessary for the exercise of the business activity
• Furnished lettings are only exempt if the landlord is a registered professional landlord. That is to say, their rental income is greater than €23,000pa, which must also be greater than their other professional income.
• In addition, woodland or woodland investments are exempt at 75% of their value, but you need to declare at their full market value.
Who is liable to the new Property Wealth tax?
As per household income tax -the world-wide real estate assets held by the whole household (i.e. husband and wife) will be taken into consideration. Children of adult age, even though they may part of your household for income tax purposes, are separately liable on the value of their own assets, if greater than €1.3m.
The tax does not apply to company or commercial assets, except in relation to personal property held through a French property company, a société civile immobilière (SCI).
What rates are payable?
The tax bands and rates of taxation applicable for 2018 are shown below.
Fraction Taxable Rate of Tax
€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%
A wealth tax cap operates, so that total taxes should not exceed 75% of income, a rule that only applies to residents.