Real estate wealth tax (IFI): what are the risks in the event of an audit?

30 October 2023

The French real estate wealth tax (IFI) is a “declaratory” tax: when the taxpayer considers that the net value of his real estate assets exceeds the tax threshold, he must, on his own initiative, file a first wealth tax return.

But what does the taxpayer risk in the absence of a declaration? In this article, you will find all the information you need to know about the audit and regularization of real estate wealth tax.

Reminder: What is the real estate wealth tax (IFI) ?

The real estate wealth tax (IFI) is an annual tax calculated on the net value of real estate assets, with a threshold of 1.3 million euros.

When taxpayers are domiciled in France for tax purposes, the taxable assets include properties located in France and outside France. For those domiciled outside France, only French real estate assets are of course considered.
If you’d like to find out more about how this tax is calculated, take a look at our guide to the IFI.

Real estate wealth tax IFI

In the event of non-declaration, over what period can the IFI be audited?

In the absence of a declaration, the real estate wealth tax can be audited over a period of 6 years. This extended limitation period also applies when the taxpayer, although having declared the IFI, has omitted to declare a property…

Otherwise, if the IFI is correctly declared by the taxpayer, the tax authorities have the right to audit the taxpayer for a period of 3 years. This type of audit will focus on verifying the values declared.

How does the tax authority identify taxpayers liable for this tax?

Thanks to data! Information is increasingly centralized and analyzed… In particular, tax auditors have access to sales data from the Notaires de France. They can therefore easily analyze the transactions that have taken place in your neighborhood and compare prices per m².

How does the IFI tax audit work?

The first stage of the audit is an “amicable procedure”: the tax authorities send a letter to the taxpayer inviting him to regularize his situation by filing the necessary wealth tax declarations for the period concerned. The taxpayer has one month in which to reply and produce the expected declarations / or, failing that, the explanations justifying the absence of declarations.

If no response is received within this period, the tax authorities will send the taxpayer a “formal notice” to file the IFI returns. Once again, the taxpayer has 30 days to respond.
In the absence of a response, the tax authorities may proceed with an automatic tax assessment, based on a valuation estimated by them.

What are the penalties?

When the taxpayer rectifies the situation on his own initiative, or during an amicable procedure (first stage of the control with a simple request for a declaration), the tax authorities will apply a surcharge of 10% + late payment interest of 0.2% per month. The same applies when declarations are filed within 30 days of receipt of the formal notice (second stage).

After this deadline, the penalty for late filing will be increased to 40% + interest at 0.2% per month.

Fraudulent maneuvers, deliberate breaches or concealment of prices may be subject to an 80% surcharge.

I forgot to declare my IFI: how to regularize?

In the course of a conversation with a neighbor, you realize how much the value of your second home in France has increased in recent years, and you realize that you should have declared this tax several years ago…

Do not panic! Inspectors from the tax authorities are always happy for taxpayers to regularize their tax affairs on their own initiative. Don’t hesitate to contact us so that we can help you with the process. We can guide you through the regularization period and establish the declarations omitted in recent years.

How can we help you ?

The missions we can offer you:

Drafting of a tax study: with simulation of your tax obligations in France ; a key solution to secure your installation in France in order to avoid unfortunate situations, such as delays or errors in your tax returns.

Follow-up of your tax returns in France: income tax, real estate wealth tax, rental income

moving to france ; buying property in france