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French Property News, June 2007
France taxes wealth even if no transfer, death or
disposal is involved. The French Finance Act dated 23
December 1989 re-introduced a wealth tax payable by individuals
when the value of their assets totals more than €760,000 on an
annual basis. This tax is frequently overlooked or even not
taken into consideration by those who have invested in
France.
Individuals who are not considered as tax
domiciled in France are only liable to pay the wealth tax if the
net value of their French based assets is above €760,000
threshold. For those domiciled in France their worldwide
assets will have to be taken into account.
Properties should be declared at the market
value. As the tax is calculated on net assets, existing debts
or taxes on the 1 January can be offset against the assets for
tax purposes. For example, a loan that has been set up for
financing a property can be offset (even if the loan has been
granted in the UK for the purchase of a French property).
The rates vary between 0.55% to 1.80%.
The concept of domicile here is the same as in
the context of French Income Tax. In accordance with the double tax
treaty 1968 a UK domiciled individual will, for example, have a
limited tax liability in France although those who are French
domiciled from a French perspective will be taxed on their
worldwide assets.
The family as a whole will be taxed. For
example, the assets of a married couple and their children (if any)
under 18 years of age will be subject to ISF if they exceed the
threshold as a whole taking into consideration their aggregated
assets.
Only a few exceptions exist in relation to
assets, which are not included in the wealth tax basis. The
basis of many of these exceptions falls within the
business/economic sphere. Antiques more than 100 years old,
literary and industrial rights, woodland owned and some pensions
are also excluded. Properties, contents, boats and even
shares (within limits) will be subject to French wealth tax.
For the non-French domiciled, there is a further important
exception. Bank accounts in Euros or any other currency, stocks and
shares and also life insurance are not subject to wealth tax.
Subject to condition, those who commercially let their furnished
properties can be exempt from ISF (article 885R CGI). For
those considered as French tax domiciled, they will have lodge
their wealth tax form by 15 June and those considered not domiciled
the deadline is different. If they are domiciled elsewhere in
Europe the deadline is 16 July and if their domicile is anywhere
else in the world it will be 31 August.
French wealth tax is due on an annual basis
and involves the submission of detailed self-assessment. Failure to
declare, or a misleading incorrect self-assessment, both attract
substantial penalties imposed by the Revenue.
The French Revenue is entitled to impose to
the taxpayers the appointment of a French basis representative in
order to deal with these wealth tax formalities.
The effect of the wealth tax should always
be considered carefully by those owning or planning to invest in
France whether they intend to become domiciled there or not and tax
planning advice should always be thought about.
For more information, please contact
Christophe Dutertre, in
Blake Lapthorn's French Private Assets and Tax team
on 023 9253 0379; email christophe.dutertre@bllaw.co.uk.
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