French wealth tax update

French wealth tax update

We’re giving this French wealth tax update following changes over the past few years.

If you own property here in Paris, you might find this useful. Especially if it means reducing your tax bill!

Changes to the French wealth tax

This tax is formerly known as the impôt de solidarité sur la fortune (solidarity wealth tax) or ISF. Following changes in 2018, it is now called the impôt sur la fortune immobilière (property wealth tax) or IFI.

Either way, people commonly refer to it as simply the ‘French wealth tax.

It comes into play if a French household holds assets exceeding €1.3 million. It is payable per household, not per person.

Previously, the government imposed wealth tax on all assets. This included real estate, plots of land, all cash in bank accounts, bonds, investments and life-insurance policies, even jewelry, racehorses, cars under 25 years old, bikes, boats, and airplanes.

However, following the changes it’s due on just real estate assets, owned either directly or indirectly in the form of shares. Other assets are no longer counted.

It means fewer people paying less tax. Good news for many.

Resident or non-resident?

The assets used to calculate the wealth tax depend on whether you are a French resident.

Those domiciled in France are liable to pay wealth tax if the net value of their worldwide assets exceeds €1.3 million.

Non-residents are only liable to pay the tax on property assets located in France.

There is also an exemption from the tax for five years on foreign assets for those who eventually become resident in France.

How to calculate the tax

Paid annually, the French wealth tax is a progressive tax. Rates range from 0.5% to 1.5%.

To calculate how much may be payable, add up the total value of assets for the household. Then, deduct all outstanding debts and overdrafts as of January 1st that year.

These deductions can include certain debts relating to the acquisition of the property, maintenance, repairs, improvements, construction, reconstruction or expansion expenses.

Deductions can also include property tax, and even the potential wealth tax itself.

The amount owed on a mortgage is also deductible. See below for more on this.

If the final amount remaining still exceeds €1,300,000, the wealth tax is liable.

However, the first €800,000 is exempt from the tax. Any amount over this is chargeable in the following tax bands.

€800,001 to €1,300,000     – 0.5% tax

€1,300,001 to €2,570,000  – 0.7% tax

€2,570,001 to €5,000,000 – 1% tax

€5,000,001 to €10,000,000 – 1.25% tax

Greater than €10,000,000 – 1.5% tax

Mortgages and the French wealth tax update

It’s not just debts, overdrafts, and taxes used as a lever to reduce the French wealth tax.

The amount owed on a mortgage is also a permitted deduction.

Since the French wealth tax update, this now includes interest-only loans. It applies to all mortgages, even those taken out before the changes came into effect.

This means that any mortgage has the potential to reduce payments of the wealth tax.

Get in touch with 56Paris

Whatever your personal situation, if you have any questions about buying or renting in our capital, 56Paris is here to help.

Get in touch today with our friendly team. All are experts on every aspect of the property market here in Paris. We’d love to hear from you.

All information given in this blog is current at the time of writing and is a guide only. At 56Paris, we always recommend consulting an accountant or tax professional for advice on your own assets and tax situation.

 

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