French Wealth Tax Explained
Alongside Lichtenstein, Switzerland and Norway, France has its own Wealth Tax based on heritage. Many countries in Europe decided to remove this tax during the nineties and at the beginning of the 21st century like Austria, Italy, Denmark or Germany. Created in 1981 by the Socialist party after the President’s election, the French Wealth Tax (called “Impôt de Solidarité sur la Fortune”) is in place in order to redistribute wealth. It concerned 539,000 taxpayers in 2009 against 300,000 in 2003 due to rise of real estate price. More than 200,000 people own net assets lower than €1M in France.
This Wealth tax applies to anyone owning a net asset over €790,000 in France. It is based on the household including spouse and children meaning only one single wealth tax return should be submitted. Resident in the country or not, you must declare your asset and pay this tax if applicable. It is a progressive tax which is only applicable on the amount above €790,000 at a rate ranging from 0.55% to 1.80%.
What is good to know is that when you move to France, you won’t need to pay the French wealth tax on your asset located outside France during the first five years. In the sixth year, you will have to declare your entire worldwide assets on the French wealth tax form. Don’t worry, French tax avoidance is a national sport in France and you can easily find a tax expert who will help you to minimise the amount of taxes you need to pay such as investing the equivalent of wealth tax in a small French company (Internet start up…).
The wealth tax return should be sent with the payment. It must be submitted at different times depending on where you live:
* You live in France. Your tax return must be submitted by June 15th.
* You live in Europe. You must send your tax return by July 15th to the following address:
Recette des impôts des non-résidents
10 rue du centre
93465 Noisy le Grand Cedex
* You live in the rest of the world. Your tax return must be submitted by August 31st to the above address.
Some assets can be exempted from the French tax like business assets and share capital, antiquities over 100 years old, objets d’arts, woods and forests.
So how exactly does this French Wealth tax work? Each year, the taxpayer needs to monitor the value of his assets. There is no need for a professional valuation to be made. As a self-assessed tax, the taxpayer needs to know the value of its assets in order to declare it. He will not be asked to pay this tax. The tax is progressive and split into seven tax brackets from 0% to 1.8% depending on the value of your assets. A rate applies to each tax bracket and it is the total amounts that will add up to the French Wealth tax. 150€ by dependant in the household must be deducted from this total amount.
* Taxable amount (€) 0 – 790,000 Rate (%) / Cumulative tax to upper limit (€) /
* Taxable amount (€) 790,000 – 1,290,000 Rate (%) 0.55 Cumulative tax to upper limit (€) 2,585
* Taxable amount (€) 1,290,000 – 2,530,000 Rate (%) 0.75 Cumulative tax to upper limit (€) 11,660
* Taxable amount (€) 2,530,000 – 3,980,000 Rate (%) 1.00 Cumulative tax to upper limit (€) 25,660
* Taxable amount (€) 3,980,000 – 7,600,000 Rate (%) 1.30 Cumulative tax to upper limit (€) 71,290
* Taxable amount (€) 7,600,000 – 16,540,000 Rate (%) 1.65 Cumulative tax to upper limit (€) 214,180
* Taxable amount (€) Over 16,540,000 Rate (%) 1-80 Cumulative tax to upper limit (€) /
What are the sanctions for those who do not want to pay the French Wealth tax? What people should be aware of is that the tax office has the possibility to reassess a taxpayer seven years after with consequent late fees.
Moreover, what you should know is that when you take a French Mortgage to purchase your property in France, the amount of this mortgage is deductible. For example, if you purchase a property of €1M and you take a mortgage of €400,000, the net value of your asset is €600,000. By consequence, you will not have to pay the French Wealth tax.