French Wealth Tax

A guide to wealth tax in France

*** UPDATES ON FRENCH TAX LAWS ***

Further information on French tax can be found on our site using this link:

Moving to France

Please note that information given in the articles found here may supersede the relevant sections below.

Wealth tax - a downside to "la belle vie en France"?

France, for all its advantages (its wonderful scenery, its pleasant climate, friendly people, high standard of living, fabulous foods and wines) has one fact of life that is somewhat "taxing" for a number of ex-pats and French property owners. In 2006, the French government introduced (strictly speaking, "re-introduced", as the tax in a slightly different form had been brought in in 1981 by Mitterand, only to be ousted by Chirac in 1986) the "Impôt de Solidarité sur la Fortune", or wealth tax as we know it in English.

A concept that needs considering

It is something of a difficult concept for many British people to accept, as it does not exist in the UK, and as such, it tends to cause consternation among those who have moved or are thinking of moving to France (Moving to France). While it is not, in most cases, as great a problem as it may appear at first glance, it nevertheless can affect some ex-pats and French property owners to a greater or lesser degree, and does need to be considered and fully understood.

French wealth tax - what is it?

Wealth tax in France is, quite simply, what it says on the box: a tax on the net wealth of householders. Wealth tax is due each June (or July in the case of non-residents) and is payable by all property owners in France with total net personal assets of €790,000 or more, as self assessed on every January 1st, having allowed for various deductions to be made. (See the "French wealth tax avoidance" paragraph below.) The tax is only assessed on personal assets, not on any business assets, and the tax is applied not to individuals, but to households. Therefore it applies to those who share a home, whether married or in a permanent live-in relationship, and also to any offspring aged under 18 who also share that home.

Who is liable for French wealth tax?

Wealth tax is judged on two different levels, depending on whether or not you are resident in France. If you are a French resident, the tax applies to net assets held anywhere in the world (if above the threshold figure), not just France, although if you have just arrived in France and are a new resident, there is now a law which allows you five years grace. For the first five years, non-France based assets need not be included in the calculation of wealth tax. Meanwhile for those who own property in France but have their main domicile elsewhere and are not French residents, the tax is levied on their French assets only, and only if they are above the threshold figure.

Calculation of wealth tax

Various changes have been made to the system for assessing wealth tax since its inception in 2006, and it is important to keep up to date as any miscalculation or failure to declare can result in penalties being levied for up to six years after the mistake or omission. The tax liability per household is calculated as follows. You should add up the total value of assets for the household and subtract all outstanding debts and overdrafts as at 1st January. The table below shows the rates that must then be applied.

Wealth tax rates

The 2010 tax bands for wealth tax are as follows:

Euros:
- Up to 790,000........0%
- 790,000 to 1,290,000........0.55 %
- 1,290,000 to 2,530,000........0.75 %
- 2,530,000 to 3,980,000........1.00 %
- 3,980,000 to 7,600,000........1.30 %
- 7,600,000 to 16,540,000........1.65 %
- above 16,540,000........1.80 %

When making your assessment, don't forget to take into account possessions such as motor vehicles, jewellery, furniture other than antiques and art as well as property and financial assets.

French wealth tax avoidance - allowable deductions

The good news, or at least, the better news, is that this is not really as scary as it may first seem. There are steps you can take to reduce your liability, and there are also moves afoot in the Sarkozy government to abolish or at least, commute the tax to lower rates. To minimize your liability, make sure that you are aware of and apply all the allowable deductions. These are:

- 30% of the current value of your main residence (French residents only)
- 20% of each unfurnished gite or rental property owned, or 30% of each furnished rental property.

Further deductions can be made for:

Income tax for the previous year and any outstanding tax for previous years, taxes d'habitation and foncière (including television licences) (Taxe Foncière and Taxe d'Habitation - property tax in France) and, rather confusingly, the wealth tax payable in the year you are assessing.

Certain types of investment funds, pension schemes and life insurances are exempt from the wealth tax, and it may benefit to make use of these. However, as the rules can change, and are somewhat complicated, it is advisable to consult an expert before making any decisions on these.

Carefully made asset transfers can also help reduce the liability, although once more, expert advice or very careful research is required in order not to jump out of the frying pan of wealth tax and into the fire of gift tax! Don't forget too, that art and antiques are exempt, so treating yourself in this way could be in order!

French mortgages and wealth tax

As far as wealth tax is concerned, it pays to have a mortgage rather than to buy your property with pure capital. This is particularly important to non-French residents, who may otherwise consider buying a holiday home in France without considering taking out a French mortgage. As French mortgages are very reasonable, indeed, much more so than UK mortgages, this is definitely worth some thought.

Sarkozy and the Bouclier Fiscal

And finally, French residents benefit from Sarkozy's 2007 tax reforms, aimed at reducing the number of tax exiles from the country. The "Bouclier Fiscal" is a law that states that any individual cannot be taxed more than 50% of his or her income, which takes into account local taxes, wealth tax, social charges and income tax. If, taking this into account, you have overpaid your liability, you can claim a refund. New French residents too, may benefit from a partial exemption from the tax which was brought into law in 2008, which applies only to assets of new residents which are owned outside France.

Wealth tax declaration dates

Ultimately, wealth tax is a self assessed tax, although it is necessary to be both honest and accurate in your self assessment! The onus is on you to decide if your assets make you liable or not, and if you are in any doubt you should take advice from the government. It is also up to you, if you decide you are liable, to apply for the relevant forms, to make the calculations according to the current rates and to submit your declaration by June 15th if you are a French resident, or by July 15th if you are not.

The big picture

Wealth tax may not be as bad as it appears, as long as you play by the rules and use all the advantages you may be entitled to. It is also not applicable to many ex-pats who do not fall into the taxable bracket.

And keep an eye on the future, as Sarkozy appears to be planning more changes such as scrapping the tax altogether. He is keen not just to stem the tide of tax refugees leaving the country, but also to increase the numbers of wealthy business people moving in. This could also encourage more UK residents to buy holiday homes there, or indeed make the move to France to live full-time. He will face opposition, however, as a lot of French people are actually rather keen on this tax, especially the ones to whom it does not apply! And of course if this tax is abolished, something will have to replace it. A tax on income from assets such as shares is currently being talked about.

Should you wish to learn more about the French tax system and get a more definite picture as to what your tax bill might be, why not contact a legal advisor?

French legal services and solicitors for those with property, business or a life in France
Lawyers providing specialist French Property services

Additional articles which may be of interest:


Tax in France
Savings and investments in France
Sarkozy and French property owners

About the author

Joanna Simm moved to the Languedoc area of south-west France in October 2004 having found her property through French Property Links.

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