Specialist in non-residents’ taxation in France, we continuously update you on all the novelties and updates of French taxation.
The wealth tax in France has recently been subject to some changes and updated from the Impôt de Solidarité sur la Fortune (ISF) to the Impôt sur la Fortune Immobilière (IFI). A few details have changed such as the taxable assets. Here is the updated list of all the assets exempt from this “new” tax.
Few taxpayers forget to apply the 30% discount on their main residence. However, if your main residence is housed in an SCI, the tax authorities refuse any deduction. Good news: the deductibility of outstanding loans is not limited to 70% of the capital, contrary to what was indicated in the IFI’s notice. The Bofip specifies that the debts relating to the main residence will be fully deductible, within the limit of the taxable value of the property (i.e. 70% of the market value of the property).
Wood, forests and rural property
The new wealth tax partial exemption rules applicable to timber and forest, long-term leased rural property, shares of forest groups and shares of agricultural land groups are identical to those of the ISF. Goods are exempt up to 75% of their value, with no ceiling, but subject to conditions.
Bare ownership of real estate
To declare real estate held in dismemberment (usufruct/ bare ownership), you must acquire new reflexes. The usufructuary used to declare the property to the ISF for its full ownership value. The bare owners were in a way exempt from ISF since they did not declare the property. With the IFI, the exemption of bare owners is not systematic. To determine whether you need to declare bare ownership of the property, you must identify the origin of the dismemberment.
If bare ownership results from a conventional disposition (will, donation, the donation to the last living person), the usufructuary will continue to declare full ownership of the property.
If the usufruct results from the legal usufruct of the surviving spouse, the tax is divided between the bare owner and the usufructuary in accordance with Schedule 669 of the General Tax Code.
In practice, your children do not have to declare the property you have given them in bare ownership. On the other hand, if, on the death of your spouse, you have chosen to receive the legal usufruct, your children (bare owners) will be taxable on the value of the bare ownership property.
Property allocated to the main activity
Real estate, held directly or indirectly (via a SCI), used for your business is exempt from IFI.
Shares and company shares
No distinction should be made according to whether the company is predominantly real estate or not. The shares or shares of companies holding real estate must be reported up to the representative fraction of the real estate assets (or rights). But there are exceptions. You do not have to report investments of less than 10% in operating companies. Stock market investments, for which 10% of the capital is rarely held, are thus excluded from the IFI.
If you hold more than 10% of the capital, you will not have to declare the value of the assets used for the company’s industrial, commercial, craft, agricultural or liberal activity.
Units of SIICs and UCIs
Investments in listed real estate companies (SIICs) are excluded from the IFI provided that they hold less than 5% of the capital and voting rights. Concerning UCIs (collective investment undertakings) with less than 20% of real estate assets: you do not declare them if you hold less than 10% of the capital
Property used for a furnished rental activity
Only assets allocated to a professional activity are excluded from the tax base at the IFI. To be considered as a professional, the lessor must earn more than 23,000 euros in annual income and the rental must cover more than half of his professional income.