France’s property wealth tax in 2023 (Impôt sur la fortune immobilière)
Who may need to pay it?
Anyone who is a tax resident of France with a property or property portfolio worth more than 1.3 million euros. However, if you have been resident outside of France for the previous five years, then only your properties situated in France are included in the calculation. This exemption for new residents ends after five years of residence in France.
Are there reductions for certain types of property or uses?
The value of your primary residence is reduced by 30% for the purposes of the property wealth tax calculation.
Partial or total exemptions are sometimes applicable to the following types of properties:
- Properties used for your professional activity
- Forests used for a professional activity
- Rural properties rented out on a long-term basis or for a professional purpose such as agricultural and industrial usage.
- Properties rented out on a furnished basis under the LMP regime (Loueur en Meublé Professionnel)
Can mortgage debts be deducted from your property or portfolio value?
Yes, under certain conditions. The following types of debts can normally be deducted:
- Mortgages obtained for the purchase of the property
- Mortgages or loans obtained to renovate or maintain the property
- Loans obtained to purchase shares in a property company
- Loans obtained to pay the Property Owner’s Tax (Taxe foncière) or French inheritance tax (Droits de succession)
What are the rules for interest-only mortgages?
In the case of interest-only mortgages, known as crédits or prêts in fine, the amount of the mortgage that is deductible is reduced each year by the value of the mortgage divided by the term. For example, a 10-year interest-only mortgage of 1,000,000 euros is reduced by 100,000 euros each year for the purposes of the calculation of net property assets. If the interest-only mortgage has no term, then the debt is fiscally amortised over 20 years.
Are there limits to the tax reliefs for property debts?
Generally, for properties or property portfolios worth more than five million euros, if the value of property debts exceeds 60% of the portfolio value, then only 50% of the excess can be deducted. For example:
Property portfolio value: 6 million euros
Value of property debts: 4 million euros (66.67%)
Maximum debt relief calculation: 6 million euros x 60% = 3.6 million euros
Amount exceeding the maximum debt relief: 400,000 euros.
50% of the above excess: 200,000 euros.
Total property assets subject to tax relief = 3.8 million euros.
Total portfolio value subjected to the property wealth tax = 2.2 million euros.
The above limitation does not apply if you can prove that you did not obtain the mortgage or loan mainly for tax purposes.
What are the tax rates for the property wealth tax?
If your taxable property portfolio exceeds 1,3 million euros, then all of the value above 800,000 euros will be taxable at the below rates for 2023:
Fraction from €0 to €800,000 0%
€800,001 to €1,300,000 0.5%
€1,300,001 to €2,570,000 0.7%
€2,570,001 to €5,000,000 1%
€5,000,001 to €10,000,000 1.25%
Fraction above €10,000,000 1.5%
Note that there are specific rules if your property has been divided into the owner of the building (nu-propriétaire) and the user (usufruitier), known as a démembrement in French.
What other notable reliefs and limits are there?
If the value of your property assets is between 1.3 and 1.4 million euros, then you can benefit from a tax relief calculated as follows: 17,500 euros – (net taxable property x 1.25%).
Charitable donations can obtain tax relief at 75% of the value of the donation, up to the limit of 50,000 euros.
The amount of your income taxes and social charges plus your French property wealth tax in 2023 cannot exceed 75% of your total income in 2022. If you exceed this amount, then the difference is deducted from your French property wealth tax bill.
How can Aisa International help you to reduce your French property wealth tax?
We can introduce you to private banks in order to obtain a loan or mortgage that could reduce your exposure to the French property wealth tax.
French government link to the French property wealth tax:
https://www.service-public.fr/particuliers/vosdroits/N20074
The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. Additionally, the author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, this article is dated and is based on legislation as of the date. It should be noted that legislation changes, but articles are rarely updated. Sometimes a new article is written; so, please check for later articles. Additionally, check for changes in legislation on official government websites. Finally, this article should not be relied on in isolation.
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