Wealth Tax Regulations
Originally posted on & updated on 1st November, 2024
Acquiring a Property Doesn’t Have to be Taxing
On the 1st of January 2018, the ‘impôt de solidarité sur la fortune’ usually ISF burst forth delivering a surge of extra interest into the French real estate and property market. For those seeking to relocate across the channel, President Macron’s brainchild is quickly growing into a hugely popular move. It also means both French residents and ex-pats are celebrating that most prized monetary possession, ‘the tax cut’.
What Does this Mean?
Currently, French residents whose global wealth exceeds €1.3 million will pay a percentage levy of up to 1.5 per cent. This law has resulted in more than 60,000 millionaires leaving the country since the turn of the century.
Tax experts are predicting many will now return, given this will apply to worldwide property only. It also means investors looking for both French luxury homes and even those charismatic castles, have been presented with a wonderful opportunity to find their dream property free from massive penalties. Here’s a concrete example below :
- For a property purchased at 1,300,000 euros, there’s no tax on the first 800,000 euros. From €800k-€1,300,000 euros, the tax calculation would be €500,000 euros x 0,50 = 2,500 €uros.
- For a property purchased at 1,500,000 euros, the calculation is 2.500 €uros for up to €1,3M + 200.000 euros x 0,70 = 1.400 euros for the next band from €1,3M euros to €1,5M euros.
Therefore the yearly additional cost would be 3,900 euros in total for a 1,5M property and just 2,500 €uros for a 1,3M property or chateau.
A Surge in Interest
In fact, agents are reporting inquiries for properties reaching their highest level for a decade because of the tax changes. The Riviera, the Dordogne, Occitanie and Provence are all feeling the benefit in this sense. The market capital in particular will really benefit from the new regulations, given demand is currently bigger than supply.
This of course will slowly balance up as the year gets older, as the buyers market becomes much more competitive, as a result of the tax burden easing. And it’s a trend set to continue with ex-pats benefiting, regardless of what sort of property they invest in.
It is believed the newly introduced reform will cost the government €3.2 billion in tax revenue. The timing couldn’t be better as most agents make an extra effort at this time of year to bring new properties to market, ready for that added Spring interest from potential investors.
2018 - A Pivotal Tax Year in France
In reality this represents a clear reduction of the tax burden on non-property assets. But remember – if the value of any real estate assets and rights within France or worldwide exceeds €1.3 million, ex-pats will still have to pay the new tax.
In truth, recent French legislation has tended to result in higher taxation, so 2018 seems certain to be pivotal when it comes to taxation on accrued wealth. According to tax experts, by using mortgages cannily combined with any non-property investments, financial liabilities in France could all but be eliminated.
From the first of January mortgages could be offset, with house contents valued either at five per cent of total assets, or their real value. French authorities are expecting a 70 per cent drop in revenues because of this. And let’s not forget France is the largest country in the European Union, and the world’s fifth-largest economy in terms of nominal GDP.
Searches for Castles & Luxury Homes
Of the total percentage of international property buyers, three per cent purchase castles – many more secure investments in luxury French real estate. And of course, there are two very important things you must analyse carefully before beginning your castle or luxury property search. What’s your realistic budget, and how might the property be used?
If you have no plans to live in your castle and don’t want to carry out full renovations, but still retain a luxury home, you could rent out the property to help with maintenance costs. It’s always a good idea to wait for a better exchange rate before making a bid on any property, because even if there’s no reduction in the sale price, a good rate of euro exchange might still make things less expensive.
Call for Action
With prices rising however and numbers of French property sales going up, putting off that long-held ambition of purchasing a dream home across the channel could be costly in the long run. But as always employ the services of a company carrying long term inside knowledge of the country, and with a solid reputation for excellent service. Good research is absolutely key.
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