IFI replaces ISF in 2018
The 2018 finance bill, in its article 12, provides for the abolition of ISF (Solidarity Tax on Wealth) and its replacement by IFI, or Tax on Immovable Property. The abolition of ISF, which has been discussed for several years, will finally come into effect in 2018,...
The 2018 finance bill, in its article 12, provides for the abolition of ISF (Solidarity Tax on Wealth) and its replacement by IFI, or Tax on Immovable Property. The abolition of ISF, which has been discussed for several years, will finally come into effect in 2018, but in favour of a new tax: the IFI.
IFI: a 2018 scale and identical valuation rules to ISF
The IFI is an annual tax that takes over the same scale and the same valuation rules as ISF in 2018. Thus, to be liable for this new tax, the taxpayer must own, as at 1st January of the tax year, real estate assets with a value greater than or equal to €1.3 million. The 30% abatement on the primary residence remains applicable.
The amount of IFI is calculated using a progressive scale by tax bracket, with the taxable portion being the amount exceeding €800,000.
Table for determining the tax payable:
| Fraction of net taxable value | Applicable rate (in %) |
| Not exceeding €800,000 | 0 |
| Exceeding €800,000 and not exceeding €1,300,000 | 0.50 |
| Exceeding €1,300,000 and not exceeding €2,570,000 | 0.70 |
| Exceeding €2,570,000 and not exceeding €5,000,000 | 1 |
| Exceeding €5,000,000 and not exceeding €10,000,000 | 1.25 |
| Exceeding €10,000,000 | 1.5 |
Here is an example that should help you understand the IFI calculation: If a taxpayer owns assets worth €4 million, the IFI payable is €25,690, calculated as follows:
- Amount due on the bracket from €800,000 to €1,300,000: (€1,300,000 – €800,000) x 0.5% = €2,500
- Amount due on the bracket from €1,300,000 to €2,570,000: (€2,570,000 – €1,300,000) x 0.70% = €8,890
- Amount due on the bracket from €2,570,000 to €4,000,000: (€4,000,000 – €2,570,000) x 1% = €14,300
Total payable: €2,500 + €8,890 + €14,300 = €25,690
A reduced tax base
The IFI tax base has been reduced. Henceforth, this tax will be limited to real estate assets not allocated by their owner to their professional activity. If the law is passed, movable property such as cash in bank accounts, financial investments, life insurance, furniture, securities and social rights will be excluded from the IFI taxable base.
However, to prevent abuse, several measures have been put in place: shares in companies or bodies held by the taxpayer will be subject to the proportion of their value representative of real estate assets owned by the company or body. Furthermore, family loans agreed directly or through interposed companies will not be deductible, with the exception of loans of a normal nature granted by certain ascendants or descendants.
