Wealth Tax in France – Get the Facts About ISF

Wealth Tax in France or Impôt de Solidarité sur la Fortune is an annual tax on the sale value of your assets, based on their value on the 1st January each year.

Who is affected?

The taxable threshold for any household is €1,300,000 worth of assets although a 30% allowance is given against the value of a principal residence. Mortgages as at 1st January can be offset and house contents can be valued at a set 5% of total assets, or their real value.

Exemptions

Certain assets are currently exempt, however, from “ISF” including antiques, collector’s items and fine art. Importantly, ‘business assets’ can be also excluded, however, they must be an asset used for a registered business, which provides your main source of income and not simply designed to hold and manage your personal wealth.

Up to now, it has been our understanding that UK qualifying pension funds can be excluded as an asset for Wealth Tax calculations, since that fund can never be turned into an asset. However, the last UK Budget proposed to relax pension rules and diversify pension options, therefore, it is less likely that exemptions will be accepted for certain forms of pension plan.

Since 2011, new legislation has confirmed that any assets held in trust must be part of a Wealth Tax return if the trust has a French resident settlor or beneficiary.

New Residents

French law has now given all new residents of France exemption from French Wealth Tax on all assets held outside France, until the 31st December of the fifth year following your year of residence.

How To Declare

All households owning taxable assets worth between €1.3 million and €2.57 million, make a wealth tax ISF declaration as part of their income tax return. Those with taxable assets that exceed €2.57 million must make a separate tax return by 15th June each year accompanied by a cheque for the amount of tax due.

Should you wish further information on how to reduce, or potentially eliminate your Wealth Tax liability, or require a review of any other financial areas it is best to seek sound professional advice first.

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