Many non resident French property owners are not aware that they are subject to the French wealth tax, even if they are not tax residents.

French President Emmanuel Macron has just brought in a reform to the French wealth tax (“ISF”), replacing it with the French real estate wealth tax (“IFI”).

Until 1 January 2018, French ISF was assessed on all assets held in France by a taxpayer when the value net of debt exceeded €1 300 000. Subject to certain exemptions, the basis for wealth tax included worldwide assets for taxpayers domiciled in France and French assets for non-resident taxpayers.

The Finance Bill for 2018 eliminates the ISF and creates a specific real estate wealth tax called “IFI” (French “Impôt sur la Fortune Immobilière”) which is assessed only on any real estate owned, directly or indirectly, by the taxpayer if the value of the taxpayer’s real estate net assets exceeds €1 300 000 from 1 January 2018. Other assets are no longer subject to the French wealth tax.

There are also limitations of deductible debts from IFI:

● When taxable wealth exceeds €5 m and debts represent 60% of this value, the portion of the debts exceeding this threshold is only deductible up to 50%;

● Interest only loans are no longer fully deductible. The value of the deductible debt is decreased each year by a portion deemed to have been repaid under an amortized loan;

● Debts directly or indirectly granted from related parties or granted to buy an asset from related parties are no longer deductible, subject to certain exceptions.

For more information visit Watson, Farley & Williams at www.wfw.com