The tax system in France is surprisingly straightforward, but one tax not many people know about until it’s too late is the annual wealth tax. This is on top of income tax and is payable on the assets you have, regardless of where they are.
So, what is it and what do you need to know?
We’re not tax experts so don’t take this as tax advice. This is simply a blog post highlighting something you need to research further before buying a gite.
What is the French wealth tax?
The French wealth tax, (Impôt sur la fortune immobilière) or IFI, is an annual tax on property assets for individuals. It came into force in 2018 and is relevant to everyone who owns property worth more than €1.3m.
Who has to pay the French wealth tax?
All French taxpayers are subject to the tax. If your property portfolio exceeds that €1.3m minimum, you’re liable for it. It’s important to note that the tax includes global assets, not just those in France.
The first €800,000 is tax free and tax is then applied on a sliding scale from 0.5% to 1.5% for property over €10m. You can check your liability using the government’s calculator.
If you have just moved to France from the UK, you are not liable for IFI for the first five years. After that time, you will be. If you have property in France but are not a resident for tax purposes, you are not liable for IFI.
Are gites subject to IFI?
If you own the gite in your own name and the value exceeds the minimum, then yes you are.
If the gite is a company property, or regarded as ‘professional real estate’, which furnished rentals can be, you won’t be subject to the tax. You will however be subject to commercial property taxes.
Are there deductibles from the French wealth tax?
Yes, there are. You can deduct mortgages and property loans from the taxable amount as well as running costs, bills, renovation or maintenance costs and other costs involved in running the gite.
Should you be worried about the French wealth tax?
In a word, no. The majority of gite owners don’t need to worry about the French wealth tax. Unless you’re one of the fortunate few whose assets exceed €1.3m, you won’t be liable for it.
For the most part, the tax system in France is fair and fairly common sense. You will need to work with a French accountant but there are plenty of those throughout the country who speak very good English.
There are also English accountants who have moved out here who speak French and know the French system. Even if you’re used to running your own affairs, we strongly recommend using one of these accountants. At least until you get to know the system well enough to manage on your own!