Reform of wealth tax in an international context

Reform of wealth tax in an international context

Reform of wealth tax in an international context

The suppression of the Impôt de Solidarité sur la Fortune (wealth tax, hereafter "ISF") and the introduction of the Impôt sur la Fortune Immobilière (Real estate wealth tax, "IFI") may make certain non-residents, who have invested in real estate companies, liable to tax in France whether French or not, listed or not, and holding assets in France.

Under French law (General Code of Taxes Article 885 A-2), French non-residents are subject to wealth tax in France based on their property located in France, provided that the cumulative value of the latter exceeds the tax threshold of the ISF, i.e. 1 300 000€. In addition, an express provision of the Act excludes the financial investments of non-residents from the calculation of wealth tax.

Therefore, it is often the case that, due to international tax conventions and French legal provisions, French non-residents have been liable to ISF in France based only on the value of their real estate located in France.

What will the situation be tomorrow with the abolition of wealth tax in France and the establishment of a tax on real estate assets?

In view of the current provisions of the Finance Bill for 2018, non-French residents will find themselves liable to real estate wealth tax when the value of their French real estate assets exceeds the threshold fixed for this Tax, i.e. 1 300 000€.

It could be considered that, taking into account the above-mentioned, things will remain as they are for non-residents.

However, this cannot be relied on. 

In fact, as concerns investments in listed real estate companies, the latter were previously considered as a financial investment, and non-residents were "protected" against ISF liability In France by the measure that exempts financial investments in French companies. However, in the current state of the Finance Bill, this measure is not being renewed.

Therefore, except for where listed real estate companies manage to convince the government and Parliament that they can be considered as equivalent to companies with an industrial or commercial activity (which is very uncertain at this stage), participation in them must be taken into account in the taxable assets of the IFI’s of non-French residents.

International conventions, in the vast majority of cases, will not be in a position to oppose this imposition, but nevertheless, the provisions of the Convention should be reiterated on a case-by-case basis.

If neither the law, nor the conventions, preclude this taxation, as with all real estate companies held by a non-resident, it will be appropriate to declare in France, to the IFI, the value of these companies, but only in proportion to their real estate assets held in France.      


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