The Impôt sur la Fortune Immobilière (IFI), or Wealth Tax on Real Estate, applies to individuals who own real estate. Introduced on 1 January 2018, it replaced the former wealth tax, ISF (Impôt de Solidarité sur la Fortune), which had a broader scope.
What is the IFI?
The IFI is an annual tax on individuals whose real estate assets exceed a set threshold. Unlike its predecessor, it applies only to real property or rights, whether held directly or indirectly through companies (French or not) or entities (e.g., a trust).
Who Must Pay the IFI?
You are subject to the IFI if you meet the following criteria:
For tax residents of France: If the net value of your worldwide real estate properties or rights, held directly or indirectly, exceeds €1,300,000 on January 1.
For non-tax residents of France: If the net value of real estate properties or rights in France, held directly or indirectly, exceeds €1,300,000.
For new tax residents of France: Individuals who have been French tax residents for less than five years benefit from a regime that excludes non-French real estate from their taxable base. Contact us for more information.
What Assets Are Included?
The IFI covers real estate properties or rights held directly or indirectly through French or foreign entities.
Exemptions and allowances
Several exemptions and deductions may reduce your IFI liability, including:
Main residence: Your primary residence enjoys a 30% value reduction, lowering your taxable base. This favourable regime applies only if you are a French tax resident.
Professional assets: Real estate used for professional activities may be exempt if specific conditions are met.
Debts and liabilities: Subject to certain conditions, you may deduct mortgages for property acquisition, renovation financing, and the property tax.
IFI Tax Rates
The IFI uses a progressive tax scale:
- €0 to €800,000: 0.00%
- €800,000 to €1,300,000: 0.50%
- €1,300,000 to €2,570,000: 0.70%
- €2,570,000 to €5,000,000: 1.00%
- €5,000,000 to €10,000,000: 1.25%
- Above €10,000,000: 1.50%
Filing and Payment Deadlines
The IFI declaration is submitted with your annual income tax return, usually between May and June. Deadlines depend on your department and filing method (i.e., online or on paper).
The French wealth tax on real estate is generally due in September.
Penalties for Non-Compliance
Failure to file an IFI declaration or underreporting assets may result in a surcharge of 10% to 40% and late payment interest of 0.20% per month.
Conclusion
The IFI is an important consideration for anyone with substantial real estate holdings in France. Understanding your obligations, available exemptions, and planning opportunities is essential.
This article provides general information about the IFI and should not be considered as tax advice. Tax laws are subject to change, and individual circumstances vary. Always consult with a qualified tax professional for advice specific to your situation.