Know your obligations with regards to wealth tax

If you own property in France, you may be liable for real estate wealth tax, even if you are not tax resident in France.  This tax is applied per household according to the ‘net’ value of your real estate assets.  Since the French government abolished the previous wealth tax (ISF) in 2018 and brought in the new real estate wealth tax (IFI), even if you used a loan to purchase your property in France, only certain debts can be deducted to obtain the ‘net’ value of those assets.

• Total net value of assets %
not exceeding 800,000€ = 0%
between 800,000€ & 1,300,000€ = 0.5%
between 1,300,000€ & 2,570,000€ = 0.7%
between 2,570,000€ & 5,000,000€ = 1%
between 5,000,000€ & 10,000,000€ = 1,25%
in excess of 10,000,000€ = 5%

For example, if the net value of your French property is €3 million, your IFI liability would be €14,400 per annum.

→  The value used to calculate the tax is the market value as at 1st January, less any deductible debt, noting that:
  • Only mortgages taken out for the purchase, construction, renovation or extension of the French property are deductible (not loans taken since purchase for none of the above reasons);
  • Interest-only mortgages are considered as repayment mortgages and a theoretical capital outstanding is calculated by amortizing the mortgage value over the term of the loan;
  • Loans made by family members, or by companies in which shareholders are related to the property owner, are not deductible.
  • Where real estate asset value exceeds €5 million, deductions are capped.
→  Non-residents only pay this tax on the value of their French real estate assets.

French residents are taxed on worldwide real estate assets, after an initial period of 5 years should they become French resident after previously having lived abroad (for at least 5 years).

If you have not been filing wealth tax declarations, the French tax authorities can go back 6-10 years in a tax inspection and can apply automatic taxation with penalties up to 40% and late-payment interests.