The future French wealth tax reform

19 May 2017

The new President of the French Republic Emmanuel Macron announced during his campaign that if he were elected President of the Republic, he would initiate a reform of the ISF, the french wealth tax, so that it would no longer be concerned with investments in companies. The Solidarity Tax on Wealth would then concern only the property owners.

Wealth tax reform: possible or not possible?

In short, the sums invested in real estate would be taxed while those invested in companies would not be taxed.

Several questions will arise when defining the outline of the next law on the subject.

What about investments in commercial real estate?

Indeed, commercial walls, land and buildings housing professional activities are considered as real estate.

In theory they will always be taxed.

What about investments in companies with real estate?

If a taxpayer invests in a business, it is assumed that it is outside the scope of the TFR. But if this company owns real estate (not to speak of a land company), then should this not be taken into account?

If effectively owning shares of a company that owns real estate makes it possible to leave the ISF it is a safe bet that the big landowners will logically resort to assemblies of this type.

Similarly, should a taxpayer owning SCPI units qualify as an investor or a property owner? A bit of both but it will have to be decided.

Impact on the rental market

The real estate rental market is tight in France but if investors are advised to turn away from real estate to focus on businesses, it is likely to stretch even more. Rental supply could fall, rents could rise and housing difficulties would increase.

Impact on state finances

Without being the tax that is most relevant to the state, the ISF remains a non-negligible resource for a country that lives permanently above its means. By eliminating the ISF on investment in enterprises, the State will therefore lose some billions of revenue each year (the ISF pays about 5 billion euros a year to the State).

Many uncertainties and uncertainties therefore for this project of reform of the ISF which is likely to be considered, if put in place, as unfair. In the end, only real estate would be considered as fortune. Currently works of art and antiquities are excluded from the ISF, if this measure is applied then would join them there furniture and valuable jewelry, savings in all its forms, shares and other investments and probably Yachts, boats and prestige cars.

Source : La Fiscalité

Cabinet Roche & Cie, Expert-Comptable à Lyon
Spécialiste de la fiscalité immobilière des non-résidents.

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