IFI and international taxation

Yes, but only on real estate assets and rights located in France. Article 964 of the French Tax Code provides that individuals whose tax domicile is not in France are liable for the IFI only on these French assets, held directly or through companies up to their real estate fraction. Their real estate located outside France falls outside the scope of the IFI. Tax is due only if the net taxable French real estate assets reach the threshold of 1,300,000 euros on 1 January of the tax year.

Tax domicile is determined under Article 4 B of the French Tax Code. A person is domiciled in France if their home or main place of stay is there, if they carry on a non-ancillary professional activity there, or if the centre of their economic interests is there. Domicile determines the scope of the IFI: a resident is taxable on worldwide real estate assets; a non-resident, on French real estate assets only (French Tax Code art. 964). Where a person is deemed resident of two States, a tax treaty may settle the residence and adjust taxation.

No. Holding a French property through an SCI, whether French or foreign, does not take the property outside the scope of the IFI. The IFI base includes the fraction of the value of the shares representing real estate assets located in France (French Tax Code art. 965). A non-resident holding a residence in France through an SCI therefore remains taxable up to this real estate fraction. Liabilities relating to these assets may be deducted, subject to the anti-abuse rules governing, in particular, shareholder current accounts and debts contracted with the family group.

Article 964 of the French Tax Code (1°) lays down a favourable rule: an individual who transfers their tax domicile to France after having been a non-resident during the five preceding calendar years is liable for the IFI only on assets located in France (by reference to the non-resident tax base set out in 2° of the same article). This limitation of the tax base applies for each year during which the person keeps their domicile in France, until 31 December of the fifth year following the year of the move. Beyond that, the new resident switches to the ordinary worldwide tax base.

Rarely. Most treaties concluded by France cover income tax and corporate income tax, without covering wealth taxes. Some treaties do, however, cover wealth; they then most often allocate the right to tax real estate to the State where the property is located, with a specific treatment of shares in predominantly real estate companies. Where such a treaty applies, the domestic taxation resulting from Article 964 of the French Tax Code must be read in the light of the treaty clause, which may prevent double taxation through an exemption or a tax credit.

The IFI is governed by Articles 964 to 983 of the French Tax Code. It replaced the solidarity wealth tax (ISF) on 1 January 2018, narrowing the tax base to real estate assets alone. Under the ISF, the taxation of non-residents on their French assets only was already based on former Article 885 A of the French Tax Code, now repealed. The territoriality principle was carried over to Article 964 of the French Tax Code for the IFI: worldwide real estate assets for residents, French real estate assets for non-residents.

These levies apply cumulatively, following distinct logics. The 3% tax on the market value of real estate targets certain entities holding French real estate that do not meet their transparency obligations: it is independent of the IFI and is borne by the structure, not the individual. The interaction between the 235 ter C holding tax and the IFI 975 VII exemption concerns, for its part, wealth-holding structures and the business asset exemption. A combined reading of these regimes is necessary whenever French real estate assets are held by a non-resident through one or more companies.