France Real Estate Wealth Tax: MRE Threshold Alert 1.3M

The real estate wealth tax, better known by the acronym IFI, does not only concern taxpayers living in France. Moroccans residing in Morocco but owning real estate in France can also fall within its scope if the value of their assets exceeds the threshold set by law.

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The rule is often unknown. An MRE who has left France may think that their French real estate assets are no longer monitored in the same way by the tax authorities. Yet, when a person is tax resident abroad, the French administration can take into account real estate assets and rights located in France. These notably include apartments, houses, land, premises, usufruct rights or shares in companies holding French real estate.

IFI applies when taxable net real estate assets exceed 1.3 million euros on January 1st of the tax year. This is not simply the gross value of the assets. Certain debts can be deducted, notably those related to acquisition, renovation work or certain taxes owed on the properties concerned. It is therefore the taxable net value that must be examined.

For MREs, the subject can concern several situations: an apartment retained in the Paris region, a rental property purchased several years ago, multiple properties transferred or acquired in France, or even shares in a family real estate company. With rising prices in certain cities, assets built up gradually can cross the threshold without the owner being fully aware.

Assets located in France remain taken into account

The difference between resident and non-resident is important. A person tax resident in France must in principle declare all their taxable real estate assets, in France as well as abroad. A person tax resident outside France is subject to IFI on their real estate assets and rights located in France, as well as on certain shareholdings in companies to the extent of French real estate held.

This means that a property in Morocco does not necessarily enter into the French calculation of a non-resident. On the other hand, a property located in France can be sufficient to create an obligation if its taxable net value, possibly added to other French assets, exceeds the threshold of 1.3 million euros.

IFI declaration is made at the same time as the income tax return, with the forms provided for this purpose. Non-residents who do not file an income tax return but whose taxable real estate assets exceed the threshold must also complete a specific declaration.

The tax is calculated according to a progressive scale. When the threshold of 1.3 million euros is exceeded, the calculation begins from 800,000 euros of taxable net assets. The amount therefore depends on the value of the assets, deductible debts and the composition of the IFI household.

For Moroccan property owners, the main risk is not asking the question. Property tax, rental income, occupancy declaration and IFI are different procedures. Paying property tax or declaring rental income does not automatically mean that the IFI question is settled.

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Before concluding that they are not concerned, MRE property owners must therefore estimate the real value of their assets in France, verify the debts still deductible and take into account the entire IFI household. The real estate wealth tax only affects a minority of taxpayers, but non-residents owning significant real estate assets in France are not outside the system.