Today, we delve into the intricacies of the French Wealth Tax, also known as Impôt sur la Fortune Immobilière (IFI). We shed light on its nuances and offer valuable insights for both French tax residents and non-residents alike. IFI is the French wealth tax, designed to redirect investments into the economy rather than real estate acquisitions strategically.
IFI, the real estate wealth tax, comes into play when an individual’s taxable real estate assets surpass 1.3 million euros as of January 1st each year. This tax is applicable to both French tax residents and non-residents, with specific criteria for each.
French tax residents must file a tax return if their real estate portfolio surpasses the 1.3 million euros threshold. This requirement applies regardless of the property’s location. Notably, newcomers to French tax residency are obligated to pay IFI tax exclusively on their French properties for the initial five years.
Non-French tax residents must also file a tax return if their French property portfolio exceeds 1.3 million euros.
What to Declare
The scope of declaration encompasses a wide range of real estate properties, including houses, apartments, garages, and buildings under construction. It also includes land, shares in real estate companies (SCI, SCPI, etc.), and usufruct.
Taxable Components and Deductions
While nearly all real estate-related assets are subject to declaration, there are allowances and deductions available to reduce the taxable real estate portfolio. Primary residences benefit from a 30% allowance, along with professional assets. Deductions can be claimed for mortgage amounts used to finance properties and property taxes (taxes foncières), providing relief for taxpayers.
The IFI tax return is submitted as an annex to the main income tax return (Form 2042). It has to be submitted between May and June, depending on the département. The first return must be submitted in paper form.
IFI tax is calculated based on tax brackets, mirroring the structure of income tax. Rates start at 0.5% for taxable amounts between 800,000 euros and 1.3 million euros, progressively increasing to 0.7% for amounts between 1.3 million and 2.57 million euros, and so forth. A comprehensive tax bracket chart is available for reference.
Similar to income tax, IFI tax is due between September and November, depending on when taxpayers receive their tax bills. For additional inquiries or assistance with IFI tax or any tax/investment questions in France, feel free to contact us via email at firstname.lastname@example.org.
If you would like us to prepare your IFI tax return on your behalf, you can complete our online form here.
In conclusion, navigating the complexities of the French Wealth Tax may seem daunting, but with a comprehensive understanding of its regulations and strategic planning, individuals can effectively manage their tax liabilities. We look forward to assisting you with any further inquiries. See you soon!