Property Wealth Tax in France

For many people who held significant assets, the now-defunct solidarity wealth tax, Impôt de solidarité sur la fortune, (ISF) used to be a major obstacle to any plans they may have had to relocate to France.

In recent times, there has been good news in that regard; with effect from 1st January 2018, the old ISF wealth tax was replaced with Impôts sur le fortune immobilière, or IFI.

This newer type of French wealth tax differs from ISF in that it is only applied to property assets, although it may also be applied to funds investing in property. ISF, meanwhile, was much broader in scope, being triggered when net personal wealth went above €1.3 million.

Below, we have outlined some of the key things you need to know about the current property wealth tax situation in France.

What is property wealth tax in France?

IFI is a tax on an individual’s real-estate assets; French taxpayers, including those living in the country as well as abroad, are subject to the tax.

IFI has at least one thing in common with the French wealth tax it replaced; €1.3 million is the key figure above which it is triggered. Indeed, the allowances, thresholds, and rates were not changed when the new IFI was implemented.

The French wealth tax system prior to 2018, however, had a much wider scope than the current wealth tax, looking at the total value of all a taxpayer’s assets – encompassing property, savings and investments, cars, and even jewellery.

Although €1.3 million is the level at which French wealth tax is triggered, it is only the first €800,000 of the combined value of all the taxpayer’s property that will be tax-free. On anything over this amount each year, they will be required to pay between 0.5% and 1.5%.

Who pays the wealth tax?

Taxpayers who have real-estate assets worth more than €1.3 million will be required to pay IFI. This wealth tax can be applied to anyone who is tax-registered in France, including those living in another country who are taxed based on the French property they own.

The property tax wealth is payable on an annual basis by any household owning taxable assets worth more than the aforementioned threshold on 1st January. The payment needs to be made in June.

Individuals whose assessable assets are worth less than €1.3 million will not need to pay any IFI tax.

How is wealth tax calculated?

French wealth tax is calculated on a per-household basis. This means that individuals living alone can be required to pay it, as well as married couples.

Unmarried couples are also taxed together for property wealth tax, even though they are not taxed together for other taxes. Common taxation applies, too, to civil partnerships for the purposes of IFI.

The assets of children under the age of 18 are included in the calculation for this tax. Children over 18 years of age are separately liable for their assets, even if for income tax puposes, they are part of the same household.

A real-estate wealth tax is assessed using the total sale value of assessable assets. However, a 30% allowance is given against the value of the taxpayer’s principal residence.

What are the wealth tax rates in France?

There are six brackets of IFI wealth tax, with the rate ranging from 0% to 1.5%. Although the tax only begins to apply once the value of a given individual’s assets goes above €1.3 million, the tax will be calculated from €800,000.

In the case of French tax residents, their global assets will be considered. The IFI calculations for non-France tax residents, however, will be made only on their property in France.

Assessable net assets value Percentage applicable
Below     €800,000 0.00%
Between €800,000 – €1300,000 0.50%
Between €1,300,000 – €2,570,000 0.70%
Between €2,570,000 – €5,000,000 1.00%
Between €5,000,000 – €10,000,000 1.25%
Above     €10,000,000 1.50%

There are allowable deductions for wealth tax, such as 30% of the value of your principal residence.

What steps should people take regarding wealth tax planning?

There are various steps that those owning assessable assets in France can take in order to minimise their IFI wealth tax liability. Such steps could include deducting their local taxes, income tax, and even their theoretic wealth tax bill as liabilities. Certain business assets are also exempt from this tax.

As providers of tax, investment, and financial advice in France for private individuals who relocate from the UK to France, our team here at Kentingtons would always emphasise the importance of speaking to a qualified expert before making any decisions on wealth tax planning.

This is a reflection of the reality that every person’s situation is going to be different and unique to them, which might have certain implications with regard to the specific wealth tax planning decisions they make.

How Can Kentingtons Help?

If you are unsure as to how the French wealth tax may apply to you, and what measures you can adopt to help reduce it, you are welcome to enquire to our financial advisors at Kentingtons.

Anyone who is not presently making use of financial advice from a qualified company such as Kentingtons, and who has real-estate assets in France, may well be paying more tax than needs to be the case. But of course, with so many legal complexities to navigate, and investment options to consider, it might not be easy for you to determine how you can best lower your tax liabilities in France.

Kentingtons is registered in France as “Conseil en Gestion de Patrimoine Certifié”. This leaves us well-placed to advise you on the tax implications of your assets not just in France, but worldwide, and what steps you might wish to take in relation to these.

To learn more about our complete service that could help make your life easier and less stressful in France – whether you are still in the process of moving from the UK to France, or have had a presence in the latter country for a while – please feel free to call or email us today.

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