The French wealth tax as you knew it has disappeared! It is now a tax on properties only which does not include your savings. But that includes property worldwide so let’s have a look at the implication and solutions! Because if you have a house still in the UK and it happens to be in London, you could be subject to this tax!

  • Who is subject to IFI:

Basically, people who have properties worth more than 1.3 million€. If you are French resident, it is your properties worldwide. But properties outside France are exempt for 5 years after you officially becomes a French resident. If you are nonresident, only the house in France is subject to IFI (if valued at more than 1.3 million€).

  • What is part of IFI

Any properties you own (main residence and holiday and rented properties) or real estate rights. Part of shares of companies or organizations for the fraction of their value representing property or real estate rights. So, if you have some funds and inside them there is shares on property, it counts. SCPI shares count.

  • What you can deduct:

You can deduct 30% for your main residence so if your main residence is worth 300 000€, then you only declare it at 210 000€.

You can also deduct all the taxes related to the properties (except taxe d’habitation).

You can also deduct the loan you have on the property or the loan for work done on the property. So, you bought a house for 200 000€ with a mortgage on it and you still have 50 000€ left to pay on it, you only declare 150 000€.

  • How much does it cost?

Although you only pay IFI when your properties are worth more than 1.30 million€, you start paying from 800 000€!

Up to 800 000 € 0%
Between 800 000 and 1 300 000 € 0.50%
Between 1 300 000 and 2 570 000 € 0.70%
Between 2 570 000 and 5 000 000 € 1%
Between 5 000 000 and 10 000 000 € 1.25%
Superior to 10 000 000 € 1.50%

It is now declared at the same time as the income tax (form 2042) and you don’t have to join any proof with it. Yes, you actually have to calculate the wealth tax yourself! And you have to pay it at the same time you declare it.

Note that your IFI tax and tax due in France and abroad can not be more than 75% of your revenues.

  • Solutions:
    1. Nue-propriete: You can buy a property with a mortgage on “nue-propriete”. Nue-propriete is having a property without having the use of it. Imagine an apple tree, the nue-propriete is the trunk and the apple is the Usufruit. So you can buy the tree without being able to eat the apples! Under ISF rules, it is the person who has the usufruit of the property who declare the value of the property to ISF. In this case, the owner is a real estate property (companies don’t pay ISF). So, you buy the property without the use (you recuperate the use of it after 15 to 18 years). In the meantime, your mortgage for this property is deducted from your total assets so it reduces your wealth tax.
    2. GIFT: If you make a donation to charities you get 75% discount limited to 50 000€.You make a donation of 40 000€ to Emmaus, then you can reduce your IFI tax by 30 000€.
    3. SELL: Well, yes that’s probably the easiest solution. You sell your holiday house or rented property and invest in an assurance vie saving account instead.

Conclusion: As usual, and especially for the IFI tax as it can be complicated, do not hesitate to contact me as advice is FREE!

Don’t hesitate either to contact me for any other subjects such as inheritance law, tax, savings, funeral cover or quote on insurances. And check out our web site for my previous articles on “practical pages”.

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