The French Wealth Tax (IFI)

What is the French Wealth Tax (IFI)?

The impôt sur la fortune immobilière’ (IFI) is the French wealth tax on an individual’s real estate assets. IFI replaced its precedent, ISF, in January 2018. It is payable by owners of French property, both living in France and abroad, whose real estate assets surpass €1,300,000 as of 1 January in the tax year concerned.

Do you hold real estate assets in France and are seeking professional valuation advice relating to your tax liabilities under IFI? Contact Samuel Thompson at: [email protected] or telephone +44 7933 239126 / +33 07 45 55 81 46.

House on the Côte d'Azur subject to French wealth tax.

Who are Subject to IFI?

  • Individuals registered as French tax payers are subject to IFI. This is based on the entirety of their real estate assets, whether located in France or overseas.
  • Individuals registered as taxpayers in another country are liable to IFI only on their French property holdings.
  • Individuals returning to France after living abroad for the previous 5 years are temporarily subject to IFI only for their French real estate assets for the first 5 years following their return. After this period, IFI will also apply to all overseas properties.

How Does IFI Work?

The tax is calculated on a household basis, which is defined as:

  • A single person living on their own counts a single household.
  • Married couples form a single household and are therefore subject to taxation on the entirety of their joint real estate assets. There are however two exceptions:
    • Couples married under the ‘régime de séparation de biens’ (a marriage contract with maintenance of separate property) and who live separately are responsible only for IFI for their own assets.
    • Couples in the legal process of divorce or separation are considered as distinct households.
  • People living in cohabitation or in civil union form a single household.

To note: Assets belonging to children under the age of 18 are taxed and must be declared with those of their parents. This can be divided in two equal parts between the parents if they are subject to two separate taxations. Conversely, assets belonging to adult children cannot form part of their parent’s estate. Even if they form part of the same household for income tax purposes.

House with a swimming pool in French alps subject to French Wealth tax

Which Real Estate Assets are Concerned by IFI?

Assets subject to taxation under IFI are properties, rights and real estate investments belonging to a taxable household as of 1 January, including:

  • Buildings (eg. houses, apartments), including all outhouses/annexes. Note that principal residences benefit from a 30% discount of their value. Also, rented property may have a tax reduction from 10-40%, depending on the rental contract (unfurnished, furnished, commercial rent).
  • Land (eg. building sites, farmland).
  • Buildings classed as historical monuments.
  • Property under construction as of 1 January in the tax year concerned.
  • Property, or parts of property, held indirectly via shares in a real estate business.
  • Property rights not considered as professional assets (e.g. usufruct, right of use or residence).
  • Shares in businesses or investment funds owning real estate in France must be reported. These are not taken into account if the ownership is less than 10% of the capital of the business. Or if the property is used for the operations of the owning business or a related business.
  • Property and rights transferred in trust or placed in a trust.
  • A fraction of the redemption value as of 1 January in that tax year representative of the taxable real estate assets included in the accounting units of life insurance contracts.

Which Assets are Exempt From IFI?

  • Properties used for the principle professional/business activities of the taxpayer and their family e.g. offices, agricultural land, medical surgery. Furnished rental properties are included in this exemption.
  • Up to 75% of the value of woods and forests, as well as shares in forestry associations (except for shares in forestry savings plans).
  • Rural properties rented under a long-term lease or for professional use.

What Costs can be Deducted from IFI?

Property-linked debts due by the taxpayer concerned as of 1 January in the applicable tax year can be deducted from IFI, including:

  • Property loans which are ongoing (to the value of the capital repayable).
  • Debts linked to the costs of improvement, re/construction or development works.
  • Taxes which have not yet been settled and linked to real estate such as ‘impôt foncier’ (property tax). ‘Taxe d’habitation’ (council/residence tax) is not deductible.
  • Some charitable donations can reduce IFI by 75% of the gift (capped at €50,000).
  • Any portion of IFI above 75% of global revenues within a tax year can be offset in the following year.

How is IFI Calculated?

When the net value of applicable real estate assets surpasses €1,300,000, IFI is calculated on a progressive basis as per the following brackets.

Note that no taxation is applied to the first €800,000 and the rate for each subsequent band applies to that range only.

A discount is also applied for assets with a net worth between €1.3-€1.4 million.

For example, if your taxable real estate assets total €1,900,000 your IFI liability will be calculated as such:

€800,000 x 0% = €0

(€1,300,000 – €800,000) x 0.50% = €2,500

(€1,900,000 – €1,300,000) x 0.70% = €4,200

Total: €6,700

Net value of declared real estate assetsTaxable rate
€0 – €800,0000%
€800,001 – €1,300,0000.50%
€1,300,001 – €2,570,0000.70%
€2,570,001 – €5,000,0001.00%
€5,000,001 – €10,000,0001.25%
> €10,000,0001.50%

Are you an overseas resident and due to pay IFI your real estate assets? You may be in disagreement with the French tax authority about the value ascribed to your real estate holdings subject to IFI. Do you require a full clarity on the subject? Do you need to ensure that your taxable assets have been properly valued? Berthier & Associés are expertly positioned to assist you. Contact Samuel Thompson for an English-speaking introduction to the valuation services that Berthier & Associés can provide:

[email protected] or telephone +44 7933 239126 / +33 07 45 55 81 46.