French Wealth Tax

The IFI: Impôt sur la Fortune Immobilière

France’s wealth tax, the Impôt sur la Fortune Immobilière (IFI), was introduced by the Loi de finances pour 2018 (Law No. 2017-1837 of 30 December 2017), replacing the broader Impôt de Solidarité sur la Fortune (ISF) which had existed since 1989. The reform transformed the wealth tax from a general tax on all assets exceeding €1.3 million to a tax specifically targeting real estate wealth. The IFI is codified in Articles 964 to 981 of the Code général des impôts (CGI).

The IFI applies to natural persons whose taxable assets have a net value exceeding €1.3 million. The tax base includes all real estate assets held directly or indirectly by the taxpayer, including buildings, land, and real estate rights (usufruct, bare ownership). Assets used for professional or business purposes are generally exempt. Movable assets (financial investments, cash, art, jewellery) are not subject to IFI, though they remain relevant for the overall wealth calculation when determining whether the €1.3 million threshold is met.

Taxable Threshold and Rate Structure

The IFI threshold of €1.3 million is assessed on the net value of the taxpayer’s real estate assets as of 1 January of the tax year. The tax is calculated on the portion of taxable assets exceeding €800,000 (the excess over the allowance). The rate structure is progressive: 0% from €800,000 to €1.3 million; 0.5% from €1.3 million to €2.57 million; 0.7% from €2.57 million to €5 million; 1% from €5 million to €10 million; and 1.25% above €10 million.

Taxpayers whose gross taxable assets exceed €1.3 million but whose net taxable assets fall below this threshold after deducting debts are not liable for IFI. The annual IFI declaration is submitted with the income tax return. The Administration Fiscale (tax authority) may challenge the declared value of assets and may impose penalties for undervaluation.

Deductible Debts

Debts encumbering taxable real estate assets are deductible from the IFI base. Deductible debts include: mortgages and loans used to acquire, construct, or renovate the property; unpaid property taxes; amounts owed to contractors for building work; and debts secured against the property. Debts not specifically secured against real estate (such as personal loans or credit card debt) are not deductible.

The deduction is subject to strict conditions: the debt must exist at the date of the tax assessment (1 January), must be the taxpayer’s liability, and must relate to a taxable asset. Debts owed to related parties (family members, controlled companies) are subject to enhanced scrutiny and may be recharacterised if not at arm’s length. The Conseil d’État in Decision No. 438562 (2021) affirmed that the deductibility of debts for IFI purposes must be strictly construed and that the taxpayer bears the burden of proving the existence and amount of the debt.

Exit Tax

The French exit tax (Articles 167 bis and 167 bis A CGI) applies to taxpayers who transfer their tax residence outside France. Introduced by the Loi de finances pour 2011 and significantly modified by the Loi de finances pour 2019, the exit tax applies to unrealised capital gains on certain assets held directly or indirectly by the taxpayer at the time of departure from France.

The exit tax applies where: (1) the taxpayer transfers residence outside France; (2) the taxpayer has been resident in France for at least six of the ten preceding years; and (3) the taxpayer’s shares, securities, or similar assets exceed €800,000 in value. The tax is calculated on the unrealised gains as of the date of departure. Taxpayers may request a suspension of payment until the actual realisation of the gains, subject to the provision of adequate guarantees.

The Conseil constitutionnel in Decision No. 2013-679 DC (2013) upheld the exit tax against constitutional challenges based on freedom of movement and property rights, finding that the tax pursued the legitimate objective of preventing tax avoidance. The exit tax is coordinated with EU law under the de Lusteyrie du Saillant jurisprudence of the Court of Justice of the European Union (C-9/02).

Tax Residence Rules

French tax residence is determined by Article 4 B CGI, which identifies a resident as a person who: (1) has their home or principal place of abode in France; (2) exercises their principal professional activity in France (whether salaried or independent); or (3) has the centre of their economic interests in France. A person is considered resident if any of these criteria is satisfied.

The French residence test interacts with double tax treaties, which may override domestic criteria. France has an extensive network of tax treaties, and treaty residence disputes are resolved by the procédure amiable (mutual agreement procedure) administered by the Direction Générale des Finances Publiques. The Conseil d’État in Decision No. 450217 (2022) clarified that the administrative guidelines on tax residence do not create binding obligations on the tax authority and that each case must be assessed on its individual facts.