Overseas Chambers of Peter Harris

Maison de la Boucterie
Rue de la Boucterie
Saint Saviour
Jersey, JE2 7ZW

How to obtain and fill out the new Wealth Tax (Impôt sur la Fortune immobilière) forms if you are not resident in France: due date 22nd May 2018

May 3rd 2018

The due date for non-residents fiing these new declarations is 22nd May 2018, in three weeks' time. The declarations themselves were only released on 25th April, 2018, which does not leave a great deal of time.

It is essential that beneficiaries of trusts with any indirect holdings in French immovable assets check their position, as will any French resident constituant or beneficiary considered to be the taxable constituant.

This summary is for non-residents owning immovable property in France directly or indirectly

Those non-residents who own French immovable property may have found difficulty in downloading the new forms for the impôt sur la fortune immobilière (IFI) from the French administration's website. The link given by the administration to www.impots.gouv.fr/portail until noon today, did not carry the search window enabling the forms to be accessed. I can assist in providing the necessary official Cerfa forms 2042-IFI and 2042-IFI-COV to those unfamiliar with the page. The administration was told and has only rectified the omission this morning.

It is essential to take advice on the first filing of the new forms, which are more detailed than the ISF (Wealth tax) forms for last year and require further information as to the nature of the immovable property and assimilated rights concerned.

Th non-resident taxpayer needs to fill out two forms, one of which, the Cerfa n° 2042-IFI is a development of the prior ISF form, but substantially modified, and the second 2042-IFI-COV which enables the French administration to place those non-residents who do to pay French income tax on French source income   within the system, outside the online declaration facility provided to French resident and non-resident income tax payers.

There are also 6 annexes attached to the declarations:

Annexe 1: Exempt professional immovable assets;

Annexe 2 : Directly held immovables with here is a second page for immeubles non-bâtis and shares in GFAs and similar entities;

Annexe 3 : Indirectly held immovable assets (through companies, tontines and repurchasable life insurance (a warning:  despite their inclusion of the trust in the notion of real property holding entities, there is no provision made for trustees as the declaration is limited to registered entities);

Annexe  4: Debts, in particular mortgages, incurred in relation to the properties, and unpaid rates for 2017 due in 2018: the debt alloweances have been extended from the prior restrictions as to loans only for purchase, construction and reconstruction (if necessary take advice on whether is allowable or not);

Annexe 5: The Plafonnement or ceiling. This is designed so as to restrict the amount of tax where the actual income of the taxpayer may be insufficient to pay both the income tax and the IFI. Whilst designed for French residents, the effect of non-discrimination clauses in Tax Treaties with France can enable Treaty residents and also EU residents and nationals to take advantage of that option. It involves a breakdown on income by category, and the foreign taxes paid to arrive at a percentage which determines whether ceiling as to contributive capacity can be deployed .  There is a calculation guide.    However, that has yet to be tested.

Annexe 6: imputation of unilateral credit for similar taxes to the IFI paid abroad.

The rates are the same as the ISF rates for 2017, and are as follows, once the taxable value after allowable deductions and exemption exceeds €1,300,000. The tax is then levied as from €800,000 on a cumulative basis:

Up to €800 000 :                                                   non-chargeable

Between  €800,000 and €1 300 000                        0.50%

Between €1,300,000 and €2,570,000                      0,70 %

Between €2,570,000 and € 5,000,000                     1,00 %

Between €5,000,000 and €10,000,000                    1,25 %

Over €10 000 000                                                  1,50 %

Please see the previous posting and the note for further comments on the allowability of loans.

Non-residents should send the two completed forms and annexes together to the usual filing centre:

Service des impôts des particuliers non-résidents :

10, rue du Centre - TSA 10 010

93465 NOISY-LE-GRAND Cedex

France.

The filing date for non-residents is by midnight 22nd May, 2018., otherwise there is an increasing risk of penalties for non-declaration.

Assistance will be need for those filing, in particular for those who may find themselves exposed to prior ISF liabilities.

Please note that the French administration is running a simultaneous information request programme for those with high value properties in certain areas of the country, in particular the PACA Côte d'Azur, which has a specialised department dealing with non-resident property ownership. That is currently being expanded westward towards Montpellier and Beziers.

I can certainly assist in preparing responses to such requests which take the form of requiring an ISF  declaration for years commencing 1st January 2012, which will be required unless there is a reason not to, such as bank loans or other finance bringing the total net value under €1,300,000 for the years in, question.

From a British and offshore perspective, the issue is compounded for settlors and beneficiaries of trusts involved in indirect holdings of French property, as the forms concerned are designed only for registered legal entities and not trusts, despite the fact that the administration considers a trust to be a property holding entity, even though an indirect means of holding French property, normally through an SCI or other company.

In addition, whilst many individuals took the initiative of funding their purchases through term loans, and to date might have escaped the declaration requirement on the basis that their net assets were under the €1,300,000 threshold, that position will no longer hold as such as of 1st January 2018.

Property portfolios worth over €5 million will only have 50% of the loans outstanding on the properties allowed as a deduction where the loan to asset ratio exceeds 60%. Some loans from what I would describe as connected parties, such as connected companies and family can also be disallowed.

Also, term or "in fine" repayment loans in place can now be treated as if they were repayable by instalments, and the allowable capital debt outstanding reduced on a yearly basis. Advice will be needed as to whether the loans will be considered to have been repaid as from their being taken out, or simply starting from the 1st January, 2018.

As certain non-residents were unable to access the download section on the French administration's website, and now the codng error has been rectified, the forms and the explantory notice in French can now be obtained at https://www.impots.gouv.fr/portail/recherche/formulaires by entering 2042 IFI in the formulaire pane, or if that does not connect by using  https://www.impots.gouv.fr/portail/formulaire/2042-ifi/declaration-dimpot-sur-la-fortune-immobiliere

Please contact Peter for any queries, advice and last minute assistance in obtaining the forms and completing them to you best correct and compliant advantage.

peter.harris@overseaschambers.com

Direct line : + 44 (0)1534 625879