Wealth Tax

There is one tax payable in France which we are not familiar with in the UK. As French residents you will be liable to wealth tax on your joint entire worldwide assets, with some small dispensations. Even if you are not yet resident in France, this tax applies to all assets located in France. So we need to understand wealth tax.

Firstly, it applies not to each individual but to the wealth of the household. By this we mean husband and wife and any children for whom they are responsible, so that the assets of all members of the household are combined and one wealth tax return is submitted.

Wealth tax is also an 'elective' tax which is self-assessed. You will not initially be sent a form to complete, but must decide when you need to make a return. This fact is often overlooked (sometimes deliberately) by many living in France or having assets in France. Bear in mind that the French taxman has up to six years in which to ask for returns, and interest and penalties can be levied.

If you are French resident, wealth tax applies to your entire worldwide net assets, and is calculated on the position at 1st January each year. The return must be made by 15th June. For non-French residents, wealth tax applies only to your French assets. Owners of second homes in France will need to monitor the value of the property each year to ensure that you have not entered the wealth tax arena. Wealth tax is payable by any household with taxable assets of over €1.3m on 1st January each year.

Here are the current rates:

Impôt sur la Fortune (wealth tax) bands*
Up to €800,000 0.00%
€800,001 to €1,300,000 0.50%
€1,300,001 to €2,570,000 0.70%
€2,570,001 to €5,000,000 1.00%
€5,000,001 to €10,000,000 1.25%
Greater than €10,000,000 1.50%
French resident taxpayers with net taxable assets up to €2.57 million do not need to make a separate wealth tax return, as the assets will be declared with their income tax return.
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And now for some good news. There are some allowances available when calculating the value of your 'Fortune'.

 

  • Obviously you need to avoid the temptation to 'talk up' the value of your property, but as a French resident you can deduct 30% of the value of your principal residence.
  • You can exclude any assets used for company or professional purposes. You can also deduct the total of your income and property taxes for the last year.
  • The French parliament has agreed partial exemption for five years from French wealth tax for most people moving to France after 6th August 2008. This exemption is also proposed as part of the new Double Taxation treaty between France and the UK, but that is still awaiting ratification. Beware though; the new exemption only covers assets outside France.
  • If you are non-resident and looking to make a sizeable investment in property in France, you should consider reducing the net value of that asset by taking out a French mortgage, even if you can afford not to. This will reduce the net value of your French property to below wealth tax thresholds.

 

Most importantly, do not bury your head in the sand and try to ignore wealth tax. The French taxman is very patient. He will get you in the end, so it is better to get it all out there in the open from the start.

 

 

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