French Wealth Tax and Company-Owned Property: The Fine Line Between Strategy and Risk

 

Understanding the Link Between Company Ownership and the French Wealth Tax (IFI)

 

Many foreign investors acquire French real estate through companies, often to protect privacy, manage inheritance, or optimize taxation.

 

However, when it comes to the Impôt sur la Fortune Immobilière (IFI), the French Wealth Tax, using a company is not always the “safe shield” it appears to be.

 

Whether this structure turns out to be smart or risky depends entirely on how it is designed, who controls it, and what the company actually does.

 

The Hidden Risks of Holding French Property Through a Company

 

Under French tax law, substance prevails over form. The tax authorities routinely look beyond the legal structure to identify the real owner and the true nature of the investment.

 

A company that merely owns a villa or an apartment, without real business activity, may still expose its shareholders to IFI if it is deemed a société à prépondérance immobilière (a company mainly holding real estate assets).

 

By contrast, a company with genuine business operations, independent management abroad, and commercial justification may be treated differently, but only if its substance is well-documented.

 

Determining where the line is drawn requires more than corporate paperwork: it demands strategic tax and legal analysis tailored to each investor’s circumstances.

 

At Sassi Law Firm, we help international clients structure their French real estate holdings in full compliance with French tax law, while preserving confidentiality, efficiency, and long-term security.

 

When a Company Triggers IFI Liability

 

Under French tax law, form never outweighs substance. The French tax administration systematically examines who truly controls and benefits from real estate assets.

 

When a company, whether French or foreign, mainly holds real estate, its shareholders are generally liable for IFI in proportion to the value of the French property they indirectly own.

 

This rule applies in particular to:

 

·      French civil real estate companies (SCI), which are transparent for tax purposes;

·      Foreign holding companies owning French residential or investment property;

·      Interposed entities such as partnerships, trusts, or layered corporate structures.

 

In short, owning real estate through a company does not automatically shield you from IFI.

 

What matters is not where the company is registered, but its purpose, activity, and asset composition.

 

Proper structuring, supported by clear documentation, commercial rationale, and genuine management abroad, is essential to prevent costly IFI reassessments.

 

When a Company Can Avoid IFI Taxation

 

The Impôt sur la Fortune Immobilière (IFI) applies only to non-professional real estate assets.

 

If a company’s main activity is commercial, for example, hotel operations, furnished rentals, or property development, its assets may qualify as professional property, potentially exempt from IFI.

 

This exemption can apply when the company demonstrates:

 

·      A genuine business purpose, operating as a real enterprise, not a passive holding;

·      Exclusive professional use, the property is used solely for business operations;

·      Active involvement, the owner or shareholder participates personally and continuously in management.

 

Example:

 

A foreign company renting a Paris apartment as furnished accommodation under a long-term commercial lease may qualify for the IFI exemption if it meets the professional activity and management conditions.

 

However, this exemption is strictly interpreted by the tax authorities. Each situation must be carefully documented to prove that the business activity is real, organized, and profit-driven.

 

Risks of Using Foreign or Complex Structures

 

Many non-residents hold French property through foreign holding companies in Luxembourg, Monaco, Switzerland, or the British Virgin Islands (BVI). These structures can offer succession and tax planning advantages, but they are closely scrutinized for potential abuse.

 

The main risks include:

 

·      Requalification as direct ownership, where the authorities “look through” artificial structures lacking substance;

·      Denial of debt deductions for circular or intra-group financing;

·      IFI reassessments and penalties for undeclared indirect ownership.

 

With the automatic exchange of financial information (CRS) now in force, the French tax administration receives detailed data from most jurisdictions worldwide, making opacity virtually impossible.

 

Today, transparency and robust structuring are the only sustainable approaches.

At Sassi Law Firm, we assist international investors in regularizing or optimizing their structures to ensure compliance, reduce risk, and preserve legitimate planning benefits.

 

Deductibility of Loans and Debts

 

Using a company to acquire French property can facilitate financing, but under IFI, loan deductions are strictly limited.

 

In recent years, tax authorities have tightened their position on intra-group or shareholder loans, which are often deemed artificial unless they meet arm’s-length and economic reality standards.

 

Inspectors assess:

 

·      Economic substance — Is the loan necessary and supported by evidence?

·      Interest rate and repayment terms — Are they consistent with market practice?

·      Origin and traceability of funds — Can the financing be independently verified?

 

Loans from shareholders or related entities are often disallowed if designed merely to reduce taxable wealth.

 

Only genuine third-party financing, properly documented and commercially justified, can safely reduce the IFI taxable base.

 

At Sassi Law Firm, we help clients review and restructure financing arrangements to ensure compliance and mitigate audit risks.

 

Practical Steps for Secure Structuring

 

Before establishing a company to acquire French property, careful planning and professional advice are essential.

 

Proper structuring can mean the difference between a legitimate, tax-efficient arrangement and one vulnerable to IFI reassessment.

 

To minimize exposure, investors should:

 

·      Determine the company’s IFI status, professional or passive;

·      Ensure transparency of beneficial ownership, in line with OECD and EU standards;

·      Design the structure to combine tax efficiency and asset protection without raising suspicion;

·      Maintain detailed documentation proving the company’s real activity, management, and financing.

 

Conclusion: Smart if Done Right, Risky if Not

 

Owning French real estate through a company can be a powerful wealth management tool, but only when structured legally, transparently, and with real substance.

 

When used correctly, it can safeguard privacy, simplify inheritance, and enhance efficiency.

 

When misused, it can trigger IFI liability, audits, and heavy penalties.

 

In French tax law, structure must follow substance. Combining robust legal design, documented rationale, and consistent compliance is the only way to turn this strategy into a lasting success.

 

At Sassi Law Firm, we help international investors build and preserve legitimate, defensible ownership structures, ensuring full compliance with French and international tax standards.

 

Expertise of Sassi Law Firm – Paris

 

For over 25 years, our practice — composed of attorneys specializing in Tax, Corporate, and Financial Criminal Law — has assisted international clients, corporations, and high-net-worth individuals in addressing complex issues related to French wealth taxation, cross-border investments, and international compliance.

Our firm advises both residents and non-residents on all aspects of the Impôt sur la Fortune Immobilière (IFI), commonly known as the French Wealth Tax, including asset valuation, declaration requirements, and strategies for legal optimization and regularization.

 

Areas of Intervention

 

Our legal professionals are actively involved in matters covering:

 

·      Wealth tax compliance (IFI): asset valuation, declaration, and audit defense.

·      International structuring: ownership through French or foreign companies (SCI, holding entities, or trusts).

·      Tax audits and investigations: representation before the Direction Générale des Finances Publiques (DGFiP) and French tax courts.

·      Voluntary disclosures and tax regularizations, particularly for undeclared real estate holdings.

·      Financial and corporate criminal law, including tax fraud, money laundering, and unlawful asset transfers.

 

Our team regularly assists during urgent proceedings such as tax investigations, seizures, account freezes, and international information requests, ensuring efficient protection of our clients’ rights and interests.

 

Reputation and Media Presence

 

The long-standing experience of Mabrouk Sassi, attorney registered with the Paris Bar, in the field of tax and financial criminal law has earned the firm a solid reputation within the business community.

 

Mr. Sassi has been regularly featured in major media outlets, including L’Express, Les Échos, L’Expansion, L’Entreprise, and BFM Business, where he provides expert commentary on tax and financial legal issues.

 

An International Practice

 

Our clients include companies, family offices, and individuals located across Europe, the Middle East, Asia, North America, and Africa.

 

We provide legal assistance for:

 

·      French wealth tax compliance for non-residents owning real estate in France;

·      Cross-border investments involving France and offshore jurisdictions;

·      Tax optimization and anti-abuse risk management under OECD and EU frameworks.

 

The firm also represents clients before French administrative and criminal courts for matters related to IFI reassessments, asset concealment allegations, or fraud proceedings.

 

Contact

 

Mabrouk Sassi, Attorney at Law – Paris Bar

Sassi Law Firm

32 avenue Carnot – 75017 Paris – France

infos@sassi-avocats.com

+33 7 71 58 58 58

www.sassi-avocats.com

 

Useful Links

 

·      General Tax Code (Code Général des Impôts – CGI)

·      Legifrance – Official French Legal Database

·      Doctrine of the French Tax Administration (BOFiP-Impôts)

·      Official website of the French Tax Administration – impots.gouv.fr

·      Ministry of Economy, Finance and Industrial and Digital Sovereignty