>What Is French Wealth Tax? A Guide To IFI
In January 2018, the solidarity wealth tax (ISF) was replaced by the IFI wealth tax. IFI is a tax on an individual's real estate assets and applies to French taxpayers living in France and abroad. In this guide, we will look at who is affected by IFI and how much the tax may cost you.
Who pays French wealth tax?
IFI applies to taxpayers with real estate assets over €1.3 million. The wealth tax can be applied to anyone who is tax registered in France, including those living abroad who are taxed based on the French property they own.
Wealth tax is calculated per household. This means it can apply to individuals living alone as well as married couples (who form the same household and are subject to common taxation across all their property). Common taxation also applies to cohabitation and civil partnerships for IFI. The assets of children under the age of 18 are included in the tax calculation. Children over 18 years old are separately liable for their assets even if they are part of the same household for income tax purposes.
How is French wealth tax calculated?
Wealth tax (IFI) has six brackets with tax ranges from 0% - 1.5%. Although the tax only applies once assets exceed €1.3 million, the tax is calculated from €800,000.
For French tax residents, global assets are considered. For non-France tax residents, the IFI calculations are made only on their property in France.
The IFI tax brackets and rates are:
- Under €800,000 - 0%
- Over €800,000 up to €1.3 million - 0.5%
- Over €1.3 million up to €2,570,000 - 0.7%
- Over €2,570,000 up to €5,000,000 - 1%
- Over €5,000,000 up to €10,000,000 - 1.25%
- Over €10,000,000 - 1.5%
IFI wealth tax discounts
There are a number of wealth tax deductions which may apply to you and your estate.
- The value of your primary residence is discounted by 30% when calculating the total value of your assets.
- Some properties may be excluded from your net real estate assets if they are for professional or agricultural use.
- Some charitable donations can reduce your IFI by 75% of the gift. (Deductions for charity donations are capped at €50,000.)
- Any portion of wealth tax above 75% of your global revenues within a tax year can be offset in the following year.
- Mortgages are deducted from the calculation of a property's value.
- Discounts may apply to a property with sitting tenants.
What assets are exempt from French wealth tax?
IFI, unlike the previous wealth tax, is limited to land and buildings and excludes investments, vehicles, jewellery, etc. There is a 5-year IFI tax exemption for foreign assets. Upon becoming a French resident, you are not liable for wealth tax on foreign properties for 5 years.
Discuss IFI with a French qualified notaire
Navigating French tax law can be complex. But it is vital that you understand the tax implications of your financial decisions. For example, did you know you can “gift†assets to family members to reduce your wealth tax? But this comes with its own challenges, as you will need to ensure your “gifting†is consistent with your inheritance planning.
At France Tax Law, our dedicated team of French law professionals can help you with all your French property law, French tax law, and French succession law needs. We offer a holistic approach ensuring your property, tax, and estate planning decisions work together whilst saving you money and removing the stress from the whole process.
Find out more; speak with a French-qualified notaire today!
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