Don't Overlook Wealth Tax
France taxes wealth even if no transfer, death or disposal is involved. The French Finance Act (23 December 1989) re-introduced a wealth tax (ISF) payable by individuals whose total assets value more than €760,000 on an annual basis. This tax is frequently overlooked 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 the €760,000 threshold. For those domiciled in France, their worldwide assets are taken into account.
Properties should be declared at the market value. As the tax is calculated on net assets, existing debts or taxes on 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 a loan granted in the UK to buy a French property). Rates vary between 0.55% to 1.80%.
Living in France?
The concept of domicile is the same as in the context of French income tax. In accordance with the 1968 double tax treaty, a UK domiciled individual will, for example, have a limited tax liability in France, although those who are French domiciled will be taxed on worldwide assets.
The family as a whole will be taxed. For example, the assets of a married couple and any children under 18 years of age will be subject to ISF if they exceed the threshold as a whole, taking into account 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 over 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 conditions, those who commercially let their furnished properties can be exempt from ISF (article 885R CGI).
Those considered as French tax domiciled should lodge their wealth tax form by 15 June. For those domiciled elsewhere in Europe, the deadline is 16 July, and if their domicile is anywhere else in the world it is 31 August.
French wealth tax is due on an annual basis and involves the submission of detailed selfassessment. Failure to declare, or a misleading incorrect selfassessment, both attract substantial penalties imposed by the French Revenue. The Revenue is entitled to impose on taxpayers a French-based representative to deal with these wealth tax formalities.
The effect of the wealth tax should always be considered carefully by those owning property or planning to invest in France, whether they intend to become domiciled there or not. Tax planning advice should always be thought about.
• The French legal team at Blake Lapthorn Tarlo Lyons. Tel: 020 7421 1632 www.bllaw.co.uk