What is France's 'wealth tax' and who pays it?
It's not only the super-yacht owning elite who are liable for the French 'wealth tax' - it can also apply to foreigners who own property outside of France.
Back in 2017 a newly-elected president Emmanuel Macron scrapped France's existing wealth tax - an act that many on the left have never forgiven him for and for which he is still labelled 'président des riches'.
However, the tax was actually replaced with a different tax - the Impôt sur la fortune immobilière (IFI) which levies extra taxation on real estate above a certain value.
The cut-off point for this is having real estate valued at €1.3 million or above - so clearly we're not talking about people on the breadline here. However, remember that if you live in France you are taxed as a household, so if you or your partner own property in a city where prices have spiralled in recent years - for example London or New York - you might find yourself liable for the extra 'wealth tax'.
Here's a look at how it works, and whether foreigners living in France have to pay it.
What 'wealth' is counted?
The headline figure here is €1.3 million - but how that is calculated is important, since the IFI is specifically a real estate tax.
When calculating your wealth, salary or other earnings (such as dividends) are not taken into account - neither are investments or other assets such as vehicles, jewellery or even a yacht, should you happen to own one.
What is counted is real estate - buildings and land - that you owned on January 1st of the tax year.
This includes houses and apartments, but also properties under construction, land that has not been build upon, parking spaces or garages and any rights that you posses (eg land usage rights) that have value and shares in companies that own property in France.
Are there any exceptions?
As all students of French grammar know, where there is a rule there are also exceptions.
Some of the most important exemptions to the wealth tax limit are;
- Main residence - if a property is your main residence, 30 percent is taken off its value when calculating the wealth tax
- Mortgage - if the the property has a mortgage, then the outstanding amount of the mortgage is deducted from the value
- Businesses - properties that are used for business purposes can be excluded from the wealth tax calculation as can any land or buildings used for agricultural purposes
- Any land that is managed as an active forest can be discounted
- Certain types of charity donations can be subtracted from your total assets
- Discounts can be applied in certain circumstances to properties that have sitting tenants (for this you would need to be registered as a professional landlord)
What's the situation for foreigners in France?
You might have heard of the 'five year rule', which is important when it comes to calculating wealth tax.
In brief, if you have been resident in France for less than five years, then only your assets in France are counted towards your total net worth. After you have been resident for five years, your total global wealth is counted - so for example if you have a house in London, New York or anywhere else outside France, that will start to be counted once you have been a resident for five years.
This is why it's a good idea to get independent financial advice before you have been resident in France for five years, if you think the wealth tax might apply to you.
If you are not resident in France but have assets here - eg second home owners - then only your assets in France are counted towards the wealth tax.
It's important to note that the 'five year rule' does not apply to other types of taxation.
For example, you would need to declare all your global income and assets when making your annual French tax declaration, regardless of how long you have lived here.
The five year rule applies to calculating assets for the wealth tax, and in certain circumstances it also applies to Americans who may be liable to inheritance tax - more on that here.
How much is it?
The tax is progressive and is charged on a sliding scale.
Once the €1.3 million limit has been reached, the tax is levied on all assets above €800,000 - assets below this level are taxed at the normal rate.
- €800,000 - €1,300,000 - 0.5 percent
- €1,300,000 - €2,570,000 - 0.7 percent
- €2,570,000 - €5,000,000 - 1 percent
- €5,000,000 - €10,000,000 - 1.25 percent
- Above €10,000,000 - 1.5 percent
You can find full details on the French government website HERE, plus details on how to calculate if you are liable to the wealth tax.
This article is intended as an overview of France's wealth tax - anyone with a complicated financial situation is strongly urged to seek independent financial advice from a professional with knowledge of both the French tax system and the regime in your home country.
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Back in 2017 a newly-elected president Emmanuel Macron scrapped France's existing wealth tax - an act that many on the left have never forgiven him for and for which he is still labelled 'président des riches'.
However, the tax was actually replaced with a different tax - the Impôt sur la fortune immobilière (IFI) which levies extra taxation on real estate above a certain value.
The cut-off point for this is having real estate valued at €1.3 million or above - so clearly we're not talking about people on the breadline here. However, remember that if you live in France you are taxed as a household, so if you or your partner own property in a city where prices have spiralled in recent years - for example London or New York - you might find yourself liable for the extra 'wealth tax'.
Here's a look at how it works, and whether foreigners living in France have to pay it.
What 'wealth' is counted?
The headline figure here is €1.3 million - but how that is calculated is important, since the IFI is specifically a real estate tax.
When calculating your wealth, salary or other earnings (such as dividends) are not taken into account - neither are investments or other assets such as vehicles, jewellery or even a yacht, should you happen to own one.
What is counted is real estate - buildings and land - that you owned on January 1st of the tax year.
This includes houses and apartments, but also properties under construction, land that has not been build upon, parking spaces or garages and any rights that you posses (eg land usage rights) that have value and shares in companies that own property in France.
Are there any exceptions?
As all students of French grammar know, where there is a rule there are also exceptions.
Some of the most important exemptions to the wealth tax limit are;
- Main residence - if a property is your main residence, 30 percent is taken off its value when calculating the wealth tax
- Mortgage - if the the property has a mortgage, then the outstanding amount of the mortgage is deducted from the value
- Businesses - properties that are used for business purposes can be excluded from the wealth tax calculation as can any land or buildings used for agricultural purposes
- Any land that is managed as an active forest can be discounted
- Certain types of charity donations can be subtracted from your total assets
- Discounts can be applied in certain circumstances to properties that have sitting tenants (for this you would need to be registered as a professional landlord)
What's the situation for foreigners in France?
You might have heard of the 'five year rule', which is important when it comes to calculating wealth tax.
In brief, if you have been resident in France for less than five years, then only your assets in France are counted towards your total net worth. After you have been resident for five years, your total global wealth is counted - so for example if you have a house in London, New York or anywhere else outside France, that will start to be counted once you have been a resident for five years.
This is why it's a good idea to get independent financial advice before you have been resident in France for five years, if you think the wealth tax might apply to you.
If you are not resident in France but have assets here - eg second home owners - then only your assets in France are counted towards the wealth tax.
It's important to note that the 'five year rule' does not apply to other types of taxation.
For example, you would need to declare all your global income and assets when making your annual French tax declaration, regardless of how long you have lived here.
The five year rule applies to calculating assets for the wealth tax, and in certain circumstances it also applies to Americans who may be liable to inheritance tax - more on that here.
How much is it?
The tax is progressive and is charged on a sliding scale.
Once the €1.3 million limit has been reached, the tax is levied on all assets above €800,000 - assets below this level are taxed at the normal rate.
- €800,000 - €1,300,000 - 0.5 percent
- €1,300,000 - €2,570,000 - 0.7 percent
- €2,570,000 - €5,000,000 - 1 percent
- €5,000,000 - €10,000,000 - 1.25 percent
- Above €10,000,000 - 1.5 percent
You can find full details on the French government website HERE, plus details on how to calculate if you are liable to the wealth tax.
This article is intended as an overview of France's wealth tax - anyone with a complicated financial situation is strongly urged to seek independent financial advice from a professional with knowledge of both the French tax system and the regime in your home country.
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