As a non-resident owning property in France and/or abroad, you may be wondering whether you are liable for property wealth tax (impôt sur la fortune immobilière – IFI).
The IFI applies only to persons who, on January 1st of the year, own net taxable property worth more than €1.3 million. These individuals are then required to file an IFI tax return the following year (N+1).
This condition is verified for the assets held by all members of the tax household, including the taxpayer, spouse, civil partner (PACS) cohabitee and minor children for whom the persons mentioned have legal administration of the assets.
Here are some important points to get in mind:
Spouses who are separated from property and do not live under the same roof, as well as spouses awaiting divorce or legal separation who have been authorized to live separately by the judge, are subject to the IFI separately.
An adult child who is attached to his or her parents’ tax household and does not personally declare income may be taxed separately for the IFI.
Persons that are resident outside France for tax purposes are taxed solely on their real estate assets and rights located in France, as well as on their shares in companies or organizations (established in France or abroad) representing a value linked to these real estate assets or rights.
NB: French nationals domiciled in Monaco for tax purposes are subject to the IFI under the same conditions as those domiciled in France.
Domicile for tax purposes in France is initially determined in accordance with French domestic law, but a tax treaty between France and the country of tax residence may use certain criteria to establish this domicile. This may result in taxation being shared between the two countries.
In the event of a return to France, people who transfer their tax residence to France after having been domiciled outside France for tax purposes for the previous five calendar years are taxable only in respect of their assets located in France. This measure applies until the fifth year following the year of return to France. Thereafter, these persons are taxed under the usual conditions (property located in France and, except where international conventions apply, outside France).
Taxable assets include built property, property under construction on January 1st of the tax year, non-built property (building land, agricultural land, non-exempt forests, etc.), rights in rem in immovable property (usufruct, right of use, right of the lessee under a building lease, etc.), and shares in companies that directly or indirectly hold property or rights in immovable property, for the portion representing such property or rights.
Property assets relating to the taxpayer’s professional activity are fully exempt.
As far as debts are concerned, the value of €1,300,000 of assets corresponds to a net value after deduction of debts. Only debts relating to taxable assets are deductible, or in proportion to the fraction of their taxable value.
Certain types of property may qualify for partial exemption, such as woodland and forests, shares in forestry groups, and rural property leased under long-term leases.
For taxpayers who declare income, the IFI form must be fulfilled at the same time as the income form(s).
Persons domiciled outside France (with the exception of those domiciled in a State of the European Economic Area) who own property in France may be invited by the tax authorities to appoint a representative in France to receive communications relating to the assessment, collection and litigation of the IFI for which they are liable.
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MFL registered lawyers remain at your disposal should you have any queries regarding the IFI application and the obligations to respect. MFL will provide you with the best lawyers to handle your situation and secure your interest.