Have you not yet declared your Real Estate Wealth Tax (IFI) and are concerned about a potential tax adjustment? Whether you’re a French resident or a non-resident, regularizing your situation can be an advantageous way to avoid heavy penalties.
The IFI applies to owners of real estate with a net value exceeding 1.3 million euros. If you haven’t declared this tax yet, it is possible to make a spontaneous regularization. This allows you to rectify omissions while minimizing tax penalties. In this article, we explain how this procedure works, the deadlines to observe, and the advantages it offers.
The Principle
According to Article 964 of the French General Tax Code (CGI), the Real Estate Wealth Tax (IFI) applies to individuals domiciled in France when the net value of their property, located both in France and abroad, exceeds 1.3 million euros. Non-resident taxpayers are also subject to the tax, but only on their assets located in France, if the net value exceeds 1.3 million euros.
The IFI is an annual tax, and liability is determined as of January 1st of each tax year.
IFI Tax Brackets
The amount of IFI due is based on a progressive scale divided into six brackets:
| Fraction of taxable net asset value | Applicable rate |
| Up to 800.000EUR | 0% |
| Between 800.000EURand 1,3 millionEUR (included) | 0,50% |
| Between 1,3 millionEUR and 2,57 millionEUR (included) | 0,70% |
| Between 2,57 millionEUR and 5 millionEUR (included) | 1% |
| Exceeding 5 millionEUR and under or equal to 10 millionEUR | 1,25% |
| Exceeding 10 millionEUR | 1,50% |
Wealth tax france calculator
We give you the possibility to evaluate your assets taxable to the IFI (tax on real estate wealth)
Why you should do it?
- To determine the net value of your taxable assets in France.
- To plan your next real estate purchases in France with serenity.
- To know how much you will be liable to the French tax authorities.
- To have a first vision with figures before buying your property.
IFI Tax Base
Properties are valued at their market value as of January 1st of the tax year. Although there is no legal definition, “market value” refers to the price that could be obtained in a real market through supply and demand, taking into account the condition of the property.
The burden of proof falls on the tax authorities if they believe the taxpayer’s declared value is too low. Typically, this is done by comparing similar properties.
A 30% deduction is allowed for the main residence, for individuals domiciled in France, provided that the property is not owned through an SCI or another company structure.
It is also possible to deduct debts related to taxable assets, such as loans for:
- The acquisition of taxable property or real estate rights (real estate loans),
- Payment for improvements, construction, reconstruction, or extension work,
- Acquisition of shares or units, proportional to the value of taxable real estate,
- Payment for maintenance work carried out by the owner, or work for which the owner was not reimbursed by the tenant by December 31 of the year the tenant vacated.
Reporting Obligations
Form 2042-IFI must be completed if your net taxable property assets as of January 1st exceed €1,300,000. If you do not have any income taxable under income tax, you must submit forms 2042-IFI-COV and 2042-IFI.
Tax Authorities’ Review Period (Right of Inspection)
The right of inspection allows the tax authorities to verify and rectify tax returns during a certain period.
3-Year Review Period: Generally, the right of inspection expires on December 31 of the third year following the year the IFI became due. For example, a tax return filed for 2023 may be audited until December 31, 2026.
6-Year Review Period: This applies when the conditions for the 3-year period are not met, such as in cases of failure to file a declaration or omission of an asset.
10-Year Review Period: In exceptional cases, such as non-compliance with reporting obligations related to foreign assets, the review period extends to 10 years.
Filing annual declarations is strategically preferable to benefit from the reduced 3-year review period, as failing to file allows the authorities to audit for up to 6 years.
Penalties for Late or Non-Filing of IFI Returns
- Failure or Delay in Filing: The tax due incurs interest of 0.20% per month and a 10% penalty for late filing. This surcharge increases to 40% if the return is not filed within 30 days of receiving a formal notice or if foreign assets are disclosed late.
- Omissions or Inaccuracies: In good faith, errors result in interest on arrears at 0.20% per month. If bad faith is established, an additional 40% penalty applies. In cases of deliberate fraud, this penalty rises to 80%.
Triggering IFI Audits
Tax audits may be triggered by various events: property sales, inheritance transactions, lack of declarations, underestimation of assets, or discrepancies between declared and actual assets. Audits are often based on cross-checked data.
The French tax authorities maintain a vast database with detailed information on taxpayers, including real estate transactions, inheritances, and IFI declarations.
Spontaneous IFI Regularization
Are you concerned about a tax audit after a sale or inheritance? Have you realized that you’ve failed to declare your IFI for several years? Spontaneous regularization is a proactive approach that helps limit the tax consequences of oversight or omission.
Advantages of Spontaneous Regularization:
- Significant reduction in penalties and interest.
- Better management of relations with tax authorities.
- Protection of assets by avoiding lengthy audits.
Our firm is here to assist you throughout the process, ensuring a hassle-free tax adjustment. We offer our expertise to help you meet your tax obligations while optimizing your financial situation.
Need Personalized Advice?
Unsure if you’re eligible or want to regularize your situation with full confidence? Our team of experts is available to answer all your questions. Contact us today to learn how we can help you quickly and smoothly regularize your IFI returns.
Act now! Every day counts in limiting potential penalties. Reach out to our experts to regularize your situation and avoid any tax risk.
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
