France, unlike Belgium, has a wealth tax on real estate. This wealth tax (l'impôt sur la fortune immobilière) also applies to non-residents. For example, if you live in Belgium and have a second residence in France. This article gives you more information on wealth tax in France for non-residents.
For whom.
The wealth tax comes into effect once you have a net property wealth of €1.3 million in France. And this regardless of whether you are an individual or a company. The assessment date is annually on 1 January.
In principle, immovable assets of minors are added to the parents' immovable assets.
Wealth tax applies to full owners and usufructuaries. The usufructuary pays wealth tax like a full owner. The bare owner is therefore exempt.
How do I calculate net real estate assets?
We can put net real estate assets in two steps determine.
In the first step we look at the total value of real estate located in France. All forms of real estate qualify for this. Think of houses, flats, undeveloped land, agricultural land, buildings under construction, heritage, etc.
There are a number of exceptions. For example, property used for professional purposes of the taxpayer is exempt under conditions. Certain forest land is also exempt.
In the second step we reduce deductible debts from the value of the property. Deductible debts are those that:
- fixed on 1 January (including interest);
- be borne by the taxpayer and;
- were specifically entered into for the purchase, preservation or renovation of the property.
The last condition is crucial. You must be able to prove the link between the debts and the property. For example, certain bullet loans are not fully deductible.
Also, debts are limited deductible if you have gross property assets of more than €5 million, financed with more than half in debt.
Certain tax debts are also deductible.
Read more about French property taxes.
For companies looks at the net value of the property, and this in relation to the total value of the company. Then the value is calculated in proportion to the number of shares per shareholder.
How do I calculate the tax payable?
As mentioned, wealth tax in France applies from the time you have a net property wealth of €1.3 million there. However, for tax calculation purposes, the first 800,000 euros is exempt. After that, there are rates from 0.5% (from €800,001) to 1.5% (from €10,000,000).
An example. You have net assets in France of €2 million. The tax is then calculated as follows:
0 - €800,000: 0% at €800,000 = €0
€800,001 to €1,300,000: 0.5% on €500,000 = €2,500
€1,300,001 to €2,570,000: 0.7% on €700,000 (2,000,000 - 1,300,000) = €4,900
Total: €7,400.
Here is an online tool to estimate wealth tax in Francen (year 2020).
Decision: investing in France
If you are planning to purchase luxury property in France, be sure to get advice on the tax aspects and purchase options. It is also advisable to discuss possible financing with your banker. After all, by financing, you reduce the tax payable.
Do you have questions about investing in France? Or would you like to know more about financing luxury property in France? Then feel free to contact on.
