This tax applies to individuals resident in France and to non-residents with assets in France and is levied on the basis of all taxable assets (including shares, jewellery, art, cars) as of the 1st January each year. Residents are liable to wealth tax (ISF) on their net assets worldwide and it is a tax on the whole household, spouse and children too. There are likely to be changes to this tax following the election. The current candidates have the following views …. Marine Le Pen will make no change, Fillon will abolish the tax and Macron will limit it to a tax purely on property.
Currently the tax rates are:
|€800,000 - €1.3M||0.5%|
|€1.3M - €2.57M||0.7%|
|€2.57M - €5.0M||1%|
|€5.0M - €10.0M||1.25%|
Taxes due, bank loans and other debts are all deductible before the calculation of net assets.
If you are resident, there is also a 30% allowance against the value of your principal home. This concession does not apply to second homes.
The applicable date for determining net assets is 1st Jan each year.
Accordingly, whatever may have transpired in the household during the year is not applicable for the purposes of assessing liability to the tax, as it is based on the situation as at the beginning of the year.
The level of your liability will depend on whether or not you are resident in France.
As a result, the value of your second home in France will be used to assess your liability to wealth tax, even though you may not resident in the country.
In determining your wealth the total net assets of the whole household are taken into consideration.
It is for each household to assess and determine for themselves whether or not they consider they are liable to pay wealth tax. There is no need for a professional valuation to be made.
There is therefore an element of voluntarism in the declaration of tax liability!
However, in the event that the tax authorities decide that you are liable to pay wealth tax, they are entitled to collect arrears of payment over the proceeding 10 years.
The French tax authority does have sight of all property transactions in the country so will be aware of the price you paid for a property.
Clearly you should seek professional tax advice based upon your own individual circumstances, but for some individuals, it may well be worthwhile looking to buy your property through an SCI (french property holding company) using the “corporate tax” option so that the property is not included in wealth tax calculations as it belongs to a company or professional venture capital fund.
Moreover it makes more sense than ever to fund the purchase through a mortgage, while rates remain quite low, which will reduce the amount of capital held in France by non-residents.
This article is for information purposes only. It is recommended you seek professional tax advice based upon your own individual circumstances, to ascertain if the wealth tax applies to you, and to what level you may or may not be exposed.