This brochure, dedicated to the IFI (real estate wealth tax) in France, focuses on the outlines of its tax system. The result of a meticulous work and a real mine of precious information. We put it at your disposal.
Wealth tax in france can be quite technical to understand for non resident. Whether you want to buy a property for the pleasure of a second home or to make a rental investment, you need to be aware of all the tax issues surrounding your project.
Wealth tax in france : non resident taxation
As a reminder, the tax on real estate wealth is one of the French taxes for which one may be liable.
As a result, wealth tax in france concerns people whose net real estate assets are equal to or greater than 1.3 million €. This value corresponds to a net value after deduction of debts. This wealth is composed of all the real estate owned by all the members of the tax household.
Wealth tax in france : The tax domicile impact
If you are fiscally domiciled outside of France, you will only be taxed on real estate and rights located in France.
Mr. and Mrs. Schultz are German tax residents and both live in Berlin. They have just acquired a magnificent villa in the south of France worth €8 million. They will therefore be liable for wealth tax in France on this property.
To avoid paying taxes in France and Germany, it will be necessary to analyze what the tax treaty between the two countries provides. The tax treaty between France and the country of tax residence may provide for a sharing of taxation between the two states or certain benefits such as a tax credit.
Acquisition of a property by bank loan
Taking out a bank loan to acquire a property in France can help reduce wealth tax. It is strongly advised to obtain this financing from a banking institution that is reliable in the eyes of the French tax authorities.
The bank loan then becomes a debt deductible from the IFI up to the amount of the outstanding capital.
Mr. and Mrs. Schultz have decided to finance their villa with a bank loan of 7 million euros from the German bank Commerzbank. Their villa is valued on the market at 8 million euros.
We arrive at the following tax calculator:
Value of the property on January 1 of the tax year (market value) – remaining capital of the borrowed amount
8 million – 7 million = 1 million. Thus the threshold of 1.3 million euros is not exceeded, the spouses will not have to pay anything.
NB: the loan is deducted up to the amount of the outstanding capital, the repayment of the loan therefore leads to a progressive increase in the net taxable value.
Wealth tax in france (IFI) : How to calculate ?
The payment of the IFI takes place in September of the tax year.
The IFI is a declarative tax. This means that all taxpayers (French tax residents or non-residents with tax obligations in France) must declare the IFI online if they have internet access at their disposal. Paper forms are available on the website impôts.gouv.fr
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