How to know if you are liable for the ISF in 2022

If you held French property assets worth more than €1.3 million on 1 January 2022, you may be subject to the real estate wealth tax (IFI) real estate wealth tax.

In 2020, 143,000 French tax households paid 1.56 billion euros in IFIs.

If you have eligible real estate assets, it is up to you to make a declaration.

Read more: Explained: France’s Property Wealth Tax Isn’t As Scary As You Think

What is IFI?

The IFI applies to built buildings and non-built assets including land as well as to certain investments where land ownership is a key factor, such as shares in an SCI.

The IFI due will be calculated on the basis of the value of the property concerned on January 1 of the year in question. However, a person’s main residence receives a 30% discount on its value.

There are also certain other reductions and exemptions, for example the 1.3 million euros does not include property used for your main activity, including shops or offices for example.

Furnished professional rental would also be considered as a good necessary for the exercise of the professional activity.

In addition, exemptions are applied to land used for forestry or agricultural purposes.

Savings accounts, life insurance schemes, furniture, cars, jewellery, works of art and other moveable property are not subject to IFI, only property in the land or physical sense.

However, IFI can also relate to property “rights”, such as a lifetime usufruct right to use the land, and to certain shares if they relate to the real estate investment, or if they have a mixed character, in proportion to the real estate investment.

Resident or non-resident?

If you are a resident of France, you are subject to the IFI tax on global real estate. For non-residents, this mainly concerns property and real estate rights in France and companies created to own property there.

For people settling in France, there is also an exemption for assets abroad until the end of the fifth calendar year starting after the year of your tax residence.

How is it calculated?

The amount to be paid is calculated according to the situation of the tax household concerned.

A single person living alone would count as a single tax household, as would a married or cohabiting couple.

The tax administration will take into account all the assets held by the tax household as a whole, and not the individuals who compose it.

There are deductible liabilities such as outstanding mortgages, debts related to construction or development work and property tax not yet paid (such as property tax).

For example, if someone bought a property worth 4 million euros to use as their principal residence and took out a loan of 2 million euros to finance the purchase, then the value is subject to a reduction of 30% as a principal residence, which gives a declarable value of € 2.8 million from which the outstanding financing can also be deducted.

This potentially leaves only around €800,000, which is below the threshold to pay the tax if no other taxable property is involved.

Deductible debts are calculated based on the amount still due on January 1 of the year in question.

When the net asset value exceeds €1.3 million, the IFI will be charged according to a progressive scale of six installments ranging from 0 to 1.5%.

Although your assets are assessed for the IFI on property whose value exceeds €1.3 million, in practice it will only be applied to the proportion of your assets which exceeds €800,000 in value, as the first installment, zero-rated, is up to that amount.

If, for example, the net taxable value of the asset is between 800,000 and 1.3 million euros, the tax will be applied at the rate of 0.5%, while for a property with a value of 1.3 to 2.57 million euros, it will be 0.7%.

Photo: The Connection

Discounts and exceptions

Households whose real estate assets are worth between €1.3 million and €1.4 million can benefit from a reduction in their IFI thanks to a calculation called the next to.

In addition, if you are a French tax resident, the amount you pay in IFI may be capped (income tax and social charges on 2021 income plus 2022 IFI must not exceed 75% of 2021 income) .

There are also various possible reductions, for example, the IFI tax payable can be reduced if the household in question donates a certain amount to charity during the year.

IFI declarations must be made on the same date as French tax declarations.

If you are a French resident or a non-resident with income to declare in France, then in most cases you will do so via your personal space on impots.gouv.fr as part of the online tax declaration, in selecting the Real estate wealth tax option when choosing the sections you need.

People filing by paper must use a 2042-IFI form which can be found using the search box on the tax website (check that you have the 2022 one).

If you are not subject to French income tax, you must complete a 2042-IFI-COV form as well as the 2042-IFI.

This year, the deadline for returning paper returns is May 19.

For electronic declarations from departments 1 to 19, non-residents and Monaco, the deadline is May 24, while for departments 20 to 54 it is May 31 and for departments 55 to 976 it is is June 8.

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