“L’impot sur la fortune “: Tax applicable to non-residents owning real estate in France

Individuals liable to IFI:

If you are a non-resident owning real estate in France, you are subject to the Impôt sur la Fortune Immobilière if the taxable net value of your real estate in France is greater than 1.3 million euros (as of January 1, 2023). This property includes the real estate held by all members of the tax household (for example: spouses and minor children).

Taxable assets under IFI:

The following assets are subject to tax :

• Real estate and property rights owned in France by your tax household
• Shares or stocks that you or your tax household hold in real estate companies holding property in France
• Shares or stocks that you or your tax household hold in real estate companies holding property in France and abroad, up to the extent of the assets and rights owned in France.

You must declare, in particular, the following assets:

-Built real estate (for personal use or rented out): houses, apartments, and their dependencies (garage, parking, cellar…)
-Buildings classified as historical monuments
-Real estate under construction as of January 1
-Unbuilt real estate (building land, agricultural land…)
-Real estate or fractions of real estate represented by shares in real estate companies
-Property rights (usufruct, right of use or habitation…)

The deductions and exemptions from IFI

Deductions :

The IFI is calculated on the net taxable value of your assets as of January 1, i.e. after deducting existing debts on that date. These debts may relate to the following expenses :

• Acquisition of taxable real estate or rights (real estate loans)
• Improvement, construction, reconstruction or enlargement work
• Acquisition of shares or stocks, proportional to the value of taxable real estate and rights
• Maintenance work owed by the owner or paid by the owner on behalf of the tenant, but for which he could not obtain reimbursement by December 31 of the year the tenant left
• Payment of taxes due for the properties concerned (property tax or inheritance tax)

Exemptions :

Non-residents, like residents, may be eligible for IFI reductions for donations made to certain organizations. Partial or total exemptions are provided under certain conditions in the following cases:

• Real estate used for your professional activity
• Woodlands under exploitation commitment or for professional use
• Rural property leased for long-term or professional use (agricultural land, buildings, and equipment)
• Furnished rentals under the fiscal regime of professional furnished landlords

Special cases of international conventions

As with the ISF, these tax rules for non-residents who own property in France can be mitigated by international conventions. Certain international tax treaties may mitigate the new IFI tax rules for residents of treaty states, particularly when they limit France’s right to tax only shares of companies whose assets are primarily made up of real estate located in France. If an international tax treaty applies to the IFI, then the non-resident concerned must verify to what extent its provisions allow or prohibit France from taxing property located in France held indirectly through a company.

The rules for non-residents regarding the « Impôt sur la Fortune Immobilière » are particularly complex. It is therefore advisable to consult a tax lawyer for tailored advice regarding your specific situation.