French Wealth Tax – What’s happening?
France has always had a reputation for being a high-tax environment, though the truth is it’s one of the most advantageous places to buy property from a tax perspective. However, there is a tax levied against net property and liquid assets held in France which has been part of building this reputation. Nevertheless, it mainly affects French residents rather than international buyers of French property. Since the high-profile exodus of over 60,000 millionaires during the last 10 years, there has been a significant drop in revenue into the government’s coffers. The Macron administration is hoping to entice the French expat elite back with a new wealth tax based on real estate assets only. This is also good news for British expats as well as non-residents with French mortgages.
Why is this important?
As stated above, the current wealth tax – Impôt de solidarité sur la fortune (ISF) – is soon to be replaced by the incumbent president’s Impôt sur la fortune immobilière (IFI). Apart from the rebranding, there are some changes to how this tax will be calculated. The current system is levying all the assets that one possesses whether in France or abroad (if a resident). The new tax will no longer apply to liquid assets. Instead, only real estate assets will be subject to tax in a bid to attract high net worth individuals back into country, having left France to shield their assets abroad in countries such as the UK. The revenue will come down to a mere €1.5bn, while the framework and scale remain unchanged.
How does the French Wealth Tax affect me?
If you’re thinking of buying a property in France or if you already own one, it might be subject to the new IFI. However, you are exempt from paying the IFI tax if the net property assets are inferior to €1,300,000. Below you will find a threshold tariff table.
|The threshold net value subject to tax||Tax rate|
|Up to €800,000||0%|
|From €800,001 and €1,300,000*||0.50%|
|From €1,300,001 and €2,570,000||0.70%|
|From €2,570,001 and €5,000,000||1%|
|From €5,000,001 and €10,000,000||1.25%|
*This will only apply if the net property value is at €1,300,000
The bigger picture
It’s worth considering taking a mortgage on your property even if you can afford to pay for it with cash. This will help you avoid paying the wealth property tax for potentially several years. We can put you in touch with the right person to speak about your options. For French mortgage rates, please consult our best buys table.