HOW TO DECLARE IFI AS A NON-RESIDENT

The IFI now applies exclusively to real estate assets and has replaced the traditional ISF. This change has implications for expatriates, as well as for impatriates who have recently returned to France.

In 2018, the budget law replaced the ISF (solidarity tax on wealth) with a new tax, the IFI (real estate wealth tax). Its objective is clear: to tax those who hold assets real estate more than 1.3 million euros.

For expatriates and those who have recently returned to France, what are the implications of this new tax system?

How do I file my IFI return with the Treasury?

Applies equally to to nonresidents, namely individuals whose tax residence has been abroad since January 1; this measure effectively taxes real estate located in France, whether held directly or indirectly. 

For the expatriates, since financial investments are already tax-exempt, this new reform had little impact on tax trends. This is especially true for those who benefit from an international tax treaty designed to prevent double taxation.

For others, the expansion of the tax base through the inclusion of certain types of real estate investments further increases their IFI, compared to the ISF.

«Rock-paper» is subject to

The values of real estate holdings as part of investments in SCPI, OPCI, SCI live or via life insurance policies or capitalization through units of account. They are included in the taxable estate on a pro rata basis according to the actual ownership of real estate assets.

This applies even if the contract is entered into abroad, such as in Luxembourg, for example. As long as the assets are located in France, they are subject to the IFI. Thus, this new method of determining the tax base is more complex because multiple layers of intermediaries can make it difficult to determine tax liability and the number of securities held.

Similarly, assets held through a fiduciary, a trust, or a foundation are now eligible for leasing transactions; previously, they were considered movable property.    

In this context, expatriates who wish to continue investing in real estate in France who wish to optimize their tax situation will opt for bare ownership. This legal arrangement effectively allows the value of the property to be excluded from the owner’s taxable income for the entire duration of the usufruct, generally between 15 and 20 years.

An ideal investment for expats who can invest in real estate without having to worry about the constraints of rental investments. This is a real advantage when you’re thousands of kilometers away from France.

How do you file your IFI return?

If you are filing a paper tax return, and you have income from French sources and are subject to the real estate wealth tax, you must complete Form 2042-IFI.

If you have no income in France to report but are subject to the IFI, you must check box 9GN on Form 2042-IFI and attach Form 2042-IFI-COV to your return. The forms are available online at the website impots.gouv.fr

You can also file your IFI return directly online.