The real estate wealth tax (IFI) replaces the solidarity tax on wealth (wealth tax) since January 2018. Many investors are expecting the possible repercussions of this change in terms of real estate investment. Nevertheless, the real estate market remains dynamic despite many fears that manifest themselves here and there. Could it be because most have come to understand that the IFI is more about wealth than real estate?
Am I concerned by the IFI?
Real Estate Tax (IFI) applies to all individuals whose net property value exceeds € 1.3 million. It concerns all property and real estate rights acquired directly or indirectly on January the 1st. Some properties are exempt in part or in full from the property tax. Individuals may also deduct certain debts from the value of their wealth before taxation.
What should I declare?
Among other things, the IFI directly concerns built buildings (primary or secondary residence), buildings classified as “historical monument”, non-built buildings (farmland, building plots), buildings under construction on the 1st January 2018, as well as fractions of buildings or buildings represented by shares in condominium corporations. The IFI is also calculated on the basis of the net value of the taxable wealth of the taxpayer, that is to say after deduction of the debts existing on January 1, 2018, subject to valid justifications.
How to reduce the IFI?
To tax the IFI, simply subscribe prohibited products. The reduction of the tax base makes it possible to reduce the IFI. Several solutions are possible:
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Real estate or financial arbitration
The IFI no longer includes securities. As a result, households that invest heavily in real estate can arbitrate a portion of their assets in favor of real estate values. The IFI makes it possible to save between 0.50% and 1.50% a year, which can be considered as an extra yield.
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Temporary usufruct donation
The IFI does not concern the bare ownership of a property. Also, to reduce its IFI, simply donate a temporary usufruct on one or more real estate to his children.
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Acquisition of bare ownership
The principle is simple: you buy one or more residential apartments, an institutional lessor acquires for its part a temporary usufruct for a period of between 15 to 18 years. The funds allocated to this project are not affected by the investor’s IFI assets.
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Buying property in Mauritius
Investing in real estate in Mauritius under the PDS regime (Property Development Scheme) allows any taxpayer to be completely exempt from the IFI. The Mauritian state does not apply this type of taxation on its territory. This allows foreigners who make a rental investment in Mauritius to take full advantage of the income generated by the rental. The only tax in force in Mauritius, regarding the purchase of a luxurious residence, is the income tax, fixed at 15%.
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Donation of real estate securities or shares of companies
When you declare IFI 2018, you can decide to direct your tax towards the financing of a major public health action and deduct 75% of the amount of your donation. With this in mind, donating money to the Foundation for Medical Research remains the most classic solution. But you can also opt for more original means such as the gift of securities or shares of society.
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Donation of titles of companies, whether listed or not, under the IFI
The transfer of listed titles or units of listed or unlisted companies such as shares, units of UCITS, bonds or shares of SCPI may also reduce the IFI. Thanks to this freehold donation, which is free from gift taxes as it is realized to the works, allows the donor to enjoy the same benefit as a cash donation can give him. In particular, it reduces its IFI by 75% of the donation, up to a limit of 50,000 euros. However, to take full advantage of this tax advantage in terms of IFI, the donor must declare the unrealized gain on the securities given to determine its taxable income.
