France scrapped its general wealth tax in 2018 but retained a tax on real estate. But people moving to France may benefit from temporary relief: during the relief period, only their French real estate assets are taken into account.
Who pays the real estate wealth tax?
The real estate wealth tax (impôt sur la fortune immobilière, or IFI) replaced France’s former wealth tax in 2018 and applies only to real estate assets.
It is due when the net taxable value of the household’s property exceeds €1.3 million on January 1st. Once this threshold is reached, the tax is calculated on the portion exceeding €800,000, at progressive rates ranging from 0.5 percent to 1.5 percent.
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French tax residents are generally taxed on their real estate assets in France and abroad, while non-French tax residents are generally taxed only on French real estate assets, subject to the applicable tax treaty.
The tax covers property held directly and property held indirectly through a French or foreign company, including an SCI, to the extent that the value of the company reflects taxable real estate.
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Cash, savings and ordinary financial investments are generally outside its scope, although shares in a company may be taxable to the extent that their value derives from real estate held directly or indirectly, subject to certain exclusions.
Married couples, civil partners and couples living together are generally assessed jointly and file a single return for the household.
What changes when you move to France?
Once you become a French tax resident, the IFI generally covers your real estate assets worldwide. That means the flat in Paris, but also the house you kept in Lisbon or the buy-to-let property in Manchester, for example.
New arrivals may benefit from a transition period. If you were not a French tax resident during the five calendar years preceding the year in which you become a French tax resident, only your French real estate assets are taxed until December 31st of the fifth year following that year. The rule is set out in article 964 of the French tax code.
Take someone who becomes a French tax resident during 2026 and was not resident in France on January 1st of that year - on January 1st 2027, 2028, 2029, 2030 and 2031, only their French real estate assets are taken into account. From January 1st 2032, their foreign real estate assets are included as well.
You do not have to apply for this relief, and your nationality and the reason for your move make no difference. It applies to someone who comes to France for a job as much as to someone who comes to retire.
If you came for a job
If you were recruited from abroad, you may also qualify for the impatriate tax regime under article 155 B of the French tax code. Subject to detailed conditions and limits, it can exempt your impatriation premium, part of the remuneration relating to work carried out abroad in the interests of your employer, and 50 percent of certain qualifying foreign-source investment income and capital gains.
The eligibility tests are similar but not identical.
For the impatriate regime, you must not have been a French tax resident during the five calendar years preceding the year in which you took up your position in France.
The two regimes do not have the same duration. The impatriate tax regime generally runs until the end of the eighth year following the year in which you start your job in France, while the IFI relief runs until the end of the fifth year following the year in which you become a French tax resident. It therefore makes sense to consider both regimes when planning your move.
When did you actually become a resident?
The IFI transition period is counted from the year in which you become a French tax resident, so establishing that date is important.
Under French law, you are generally considered resident if your home or main place of stay is in France, if France is where you carry on your main professional activity, or if your centre of economic interests is here.
Meeting any one of these tests may be enough. If another country also treats you as resident, the applicable tax treaty will generally determine where you are treated as resident for treaty purposes.
READ ALSO: 183 day rule: How France calculates tax residency
In practice, a move rarely happens on a single date. Your family may arrive during the summer before your new job begins, your former home may remain available or on the market for several months, and part of your income may still be paid abroad.
It is therefore important to keep a clear record of key events, such as signing a lease or purchasing a home in France, enrolling children in school, starting your French employment and giving up your home abroad.
Buying a home
Many people buy a home during their first years in France, and some of the decisions made at that point can affect their real estate wealth tax for years.
If you buy your main home in your own name, its value for real estate wealth tax purposes is reduced by 30 percent.
If you buy your main home through an SCI, the statutory 30 percent allowance does not apply to the value of the shares. The valuation of those shares may nevertheless reflect their specific characteristics and the company’s eligible liabilities.
An SCI can still be the right choice, for instance to organise ownership within the family or prepare for succession, but the tax cost should be weighed as part of that decision.
A mortgage used to acquire the property can generally be deducted, subject to the detailed French rules governing eligible debts. Loans from relatives, or from a company controlled by the family, are subject to tighter restrictions and require particular care.
Where property is held through a company, the shares are not simply valued as a proportionate slice of the property’s market value. Their taxable value is based on the portion attributable to taxable real estate.
The calculation may take account of eligible liabilities linked to those assets, but debts unrelated to taxable real estate are generally disregarded. The French tax authorities may scrutinise these valuations.
Holding French property through a French or foreign legal entity may also bring the entity within the scope of France’s separate annual 3 percent tax on the market value of French real estate. Broad exemptions are available, but they may depend on meeting specific disclosure requirements.
Before the five years are up
Around the fifth year, it is worth reviewing the real estate assets you own abroad: what they are worth, what debts relate to them and how they are held. Once the relief period ends, those assets must be taken into account together with your French property.
If the household’s net taxable real estate exceeds the €1.3 million threshold, an IFI return must generally be filed alongside the French income tax return.
A recent case
One of our recent clients, a senior executive, was relocating to France with his family after several years abroad to join a French group. He retained real estate interests in the country he was leaving and planned to buy a home in France.
We documented the date on which he became a French tax resident, confirmed his eligibility for the impatriate tax regime and identified the assets falling within the scope of the French real estate wealth tax. During the temporary relief period, only his French real estate assets were taken into account.
Cassandre Nogues is a tax lawyer at Donoé, a French law firm advising entrepreneurs, executives and their families.
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