French real estate wealth tax: How to properly declare your french real estate wealth tax (IFI)?
It’s time to calculate your french real estate wealth tax. Despite popular belief, living abroad does not exempt you from paying taxes in France.
Who is concerned?
The IFI (french real estate wealth tax) is due annually by all non-residents, i.e. people resident outside France for tax purposes, once the net value of their French real estate assets exceeds €1.3 million on 1 January.
The tax affects real estate assets only (pieces of art or vintage cars are therefore not taken into account). This means that you are subject to this tax if you own in France
A directly owned built or unbuilt property.
Ex: you own a secondary house or flat, a building under construction or you have inherited agricultural land.
A property or a fraction thereof held indirectly via company shares.
Ex: you hold shares in an SCI société civile immobilière – real estate partnership that owns several apartments or you are a partner in a family limited company (SARL de famille) that owns a villa.
Real estate assets and real estate rights.
Ex: you or your minor children hold the usufruct of a property following a partition.
Penalties for non-compliance with IFI (french real estate wealth tax) ?
The tax law is certainly complex but remains an essential element to master in order to avoid any sanction.
You risk a penalty of 10% in case of non-declaration or late declaration up to 30 days from the authorities’ formal notice, and a penalty of 40% if beyond that time frame. In addition, interest of 0.20% per month of delay, i.e. 2.4% interest per year, will apply. In case of late payment, a 10% surcharge on the tax due will be applicable. You may also be subject to penalties for inaccuracies or omissions in your tax return, including interest on arrears of 0.20% per month, or 2.4% per year.
You may also incur penalties for inaccuracies or omissions in your declaration, including interest of 0.20% per month, or 2.4% per year.
The tax authority may also proceed with a taxation d’office (administrative assessment), for 3 years in the case of underevaluation, and up to 6 years in the case of omission, after the taxable event on 1 January.
If you do not file a tax return for 2023, the administration can rectify the tax until 31 December 2029.
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.
French real estate wealth tax : Calculation of the tax
The IFI is due by households (married, civil union or partners and their minor children) whose real estate properties and rights (buildings but also shares of SCI, for example) represent a net value (after deduction of authorised expenses) of more than €1,300,000 on 1 January.
The correct calculation of the tax base is essential to protect against any administrative sanction and to optimise taxation. The tax base, which is the basis for calculating the tax, is just as important as the applicable rate, which is far from being understood by the general public.
The calculation is done in two steps. First, it is necessary to determine the taxable assets, second to subtract from it the deductible liabilities.
The calculation is as follows:
IFI taxable base = Taxable assets – deductible debts
The assets consist of real estate properties and rights belonging to the household: land, buildings or shares corresponding to real estate (see our ebook on the IFI). Several tax mechanisms allow to reduce the amount of taxable asset. For example, the 30% allowance on the value of the main residence: if the residence is worth €1,000,000, only 70% of that value is taken into account in the assets calculation, i.e. €700,000. In this way, €300,000 are exempt from IFI.
The liabilities linked to the latter must then be subtracted from the assets (bank debts for the outstanding capital under certain conditions, theoretical IFI etc.).
The rate of the IFI is applied in tranches, and varies from 0 to 1.5%. This means that you will never be taxed at 1.5% on your entire real estate assets. The 1.5% rate only applies to the bracket above €10,000,000. In addition, the first €800,000 is not taxed (technically taxed at 0%).
|Fraction of the net taxable value of the assets||Applicable rate|
|Up to €800,000||0%|
|Between €800,001 and €1,300,000||0,50%|
|Between €1,300,001 and €2,570,000||0,70%|
|Between €2,570,001 and €5,000,000||1%|
|Between €5,000,001 and €10,000,000||1,25%|
|More than € 10,000,000||1.50%|
French real estate wealth tax: Why does the scale start at €800,000 and not €1,300,000?
In April 2011, the government decided to raise the threshold for the wealth tax (Impôt sur la fortune ISF) from €800,000 to €1.3 million of assets. Today, the IFI replaces the ISF and the threshold for triggering the tax has remained at €1.3 million while the calculation still starts at €800,000. A household with a net real estate wealth of €1.2 million is therefore not liable for the IFI (1.2m < 1.3m).
After calculating the assets and deducting the liabilities, the net value of the Smith family’s French real estate assets amounts to 1,500,000 euros. They are then liable for €3,900 of IFI, or about 0.23% of their total French real estate assets.
Note that certain mechanisms allow to reduce the amount of IFI due such as the tax reduction for donations or the discount for assets ranging from €1.3 million to €1.4 million.
The tax return must be made online if your main residence has internet access and you are able to file your tax return online. As a non-resident, you must file an IFI return and its annexes. If the due IFI amounts over €300, you must proceed by electronic payment.
In conclusion, understanding the rules of the IFI is necessary both to protect yourself against any administrative sanction and to optimise your assets.
The experts at Cabinet Roche & Cie, who specialise in the taxation of non-residents, are at your disposal for any questions you may have, and offer to carry out this task with expertise and rigour, in order to guarantee you genuine legal security.
The Team Roche & Cie
Professionals or individuals, French or international, since 1948, Roche & Cie has been assisting clients from all horizons.
+33 (0) 4 78 27 43 06