Understanding the French Wealth Tax (IFI) Who Pays, How It’s Calculated, and What’s Exempt

 

A clear overview of France’s Wealth Tax (IFI): who it applies to, how it’s calculated, and how to optimize compliance and exemptions.

 

The Impôt sur la Fortune Immobilière (IFI), French’s Wealth Tax on real estate, applies to individuals whose worldwide real estate assets (for French residents) or French-situated real estate assets (for non-residents) exceed a net value of €1.3 million as of January 1 each year.

 

Although often misunderstood, France’s Wealth Tax IFI remains one of the most significant and scrutinized taxes affecting property owners, investors, and expatriates with assets connected to France. It captures not only property held directly but also real estate owned indirectly through companies, trusts, or investment vehicles, making it particularly relevant for international structures.

 

Understanding how IFI is calculated, which assets are included or exempt, and how to document legitimate deductions is essential to avoid costly mistakes, unnecessary exposure, or reassessment by the French tax administration.

 

At Sassi Law Firm, we guide both residents and non-residents in analyzing their IFI position, identifying potential exemptions, and structuring ownership efficiently, ensuring full compliance with French law while preserving confidentiality and tax efficiency.

 

Who Is Liable for IFI?

 

French Tax Residents

 

Individuals whose tax domicile is located in France are subject to IFI on their worldwide real estate assets, whether owned directly, through companies (e.g., SCI, SARL de famille), or via trusts and other investment vehicles.

 

The French tax authorities adopt a substance-over-form approach, looking beyond formal ownership to identify the beneficial owner of the property.

 

Non-Residents

 

Non-residents are liable only on their French-situated real estate, held directly or indirectly.

 

This includes:

 

• Properties physically located in France;
• Shares in French companies owning real estate;

 

Or shares in foreign entities whose assets consist mainly of French property (sociétés à prépondérance immobilière).

 

Certain tax treaties (e.g., with the U.S. or UAE) may limit IFI’s scope for foreign residents.

 

Married Couples and Civil Partners

 

IFI is assessed on the household’s combined real estate wealth, regardless of the marital regime, unless the spouses are legally separated. Both partners must declare all taxable assets, including those held indirectly or jointly.

 

Key Takeaway:

 

• IFI liability depends on tax residence and ownership structure. Non-residents are not immune, particularly when they hold French property through companies or trusts.

 

How IFI Is Calculated

 

The taxable base includes the net market value of real estate assets, i.e., their fair market value minus eligible debts as of January 1st.

 

Determining the Taxable Base

 

The taxable base corresponds to the realistic market value of all real estate assets (direct or indirect).

 

From this total, certain debts may be deducted, provided they are:

 

• Directly linked to taxable property (acquisition, renovation, construction loans);
• Economically genuine; and
• Properly documented.
• Intra-group or shareholder loans are often disallowed if not at arm’s length.

 

Progressive Tax Scale

 

Net Taxable Value	Applicable Rate
Up to €800,000	0%
€800,001 – €1,300,000	0.50%
€1,300,001 – €2,570,000	0.70%
€2,570,001 – €5,000,000	1.00%
€5,000,001 – €10,000,000	1.25%
Above €10,000,000	1.50%

 

Example:

 

A taxpayer with €3 million in taxable real estate would owe approximately €23,500 in IFI, after applying the progressive rates and the €1.3 million threshold.

 

What Assets Are Included

 

IFI covers a broad range of real estate-related assets, including:

 

• Primary and secondary residences;
• Rental and investment properties;
• Building plots, undeveloped land, and rights in rem (usufruct, bare ownership);
• Shares in real estate companies (SCI, SCPI, OPCI);
• Indirect ownership via foreign holding companies primarily owning French property.

 

Key Point:

 

Even real estate held through foreign entities may fall under IFI if more than 50% of their value derives from French property. What matters is economic reality, not legal form.

 

What Debts Are Deductible

 

Only genuine, documented debts related to taxable real estate can be deducted. Eligible debts include:

 

• Acquisition, construction, or renovation loans;
• Notary fees and acquisition costs if financed by borrowing.

 

Loans that are intra-group, shareholder-based, or circular are often rejected unless proven to be arm’s length.

 

Since 2018, the French tax administration applies strict scrutiny to artificial financing structures.

 

Key Insight:

 

The deduction of debts under IFI now requires proof of economic authenticity — not just accounting logic. Poorly documented loans can result in reassessment and penalties.

 

Exemptions and Reliefs

 

Certain assets are fully or partially exempt, including:

 

• Professional real estate used for the owner’s business;
• Property held by operating companies when essential to commercial activity;
• Agricultural and forestry land under long-term management;
• Foreign property held by new French residents (five-year exemption);
• Charitable donations reducing IFI liability by up to 75%, capped at €50,000 per year.

 

Key Takeaway:

 

• IFI exemptions are valuable but narrowly interpreted. Proper legal documentation and economic justification are essential to secure them.

 

Compliance and Declaration

 

French Residents

 

IFI is declared annually with the income tax return, detailing:

 

• The value and composition of real estate assets;
• Claimed deductions and exemptions;
• Supporting documentation for entities or trusts involved.

 

Non-Residents

 

Non-residents must file a separate return with the Direction des Impôts des Non-Résidents (DINR) in Noisy-le-Grand.

 

All French real estate, direct or indirect, must be reported.

 

Penalties for Non-Compliance

 

Failure to declare, under-declaration, or non-payment can trigger:

 

• Interest (0.2% per month);
• Penalties (10%–80%);
• Criminal sanctions for deliberate concealment.

 

Key Takeaway:

 

IFI compliance requires transparency and documentation. The French tax authorities now use global data exchange (CRS, FATCA) to identify undeclared assets.

 

Conclusion

 

The French Wealth Tax (IFI) remains a cornerstone of France’s tax system, and a key consideration for anyone owning French property.

 

Whether you are a resident, expatriate, or international investor, understanding IFI’s mechanics is essential for both compliance and optimization.

 

At Sassi Law Firm, we assist clients worldwide in assessing, declaring, and structuring their real estate holdings to remain fully compliant while preserving confidentiality, legal security, and tax efficiency.

 

Expertise of Sassi Law Firm – Paris

For over 30 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 North America, Europe, the Middle East, Asia, , 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

 

Keywords

 

French Wealth Tax, IFI France, real estate tax France, non-resident tax France, French property ownership, French tax lawyer, Sassi Law Firm, international tax compliance, IFI exemptions, IFI declaration, French real estate structuring