Wealth tax and ‘exit tax’: useful considerations

Useful considerations

If you are required to declare French property wealth tax (IFI – impôt sur la fortune immobilière), this is done at the same time as your annual income tax return.

Most French tax residents complete both declarations online via the official tax website, with deadlines typically falling between mid-May and early June, depending on where you live. First-time declarers may still use paper forms, although online filing is encouraged and becomes standard thereafter.

You do not need to send supporting documents with your declaration, but you should retain them for at least four years in case the tax authorities request further information. IFI bills are generally issued in late summer and are payable in September.

What deductions are allowed?

IFI applies primarily to property, but also to certain property-related rights, such as a right to occupy a home. It can also apply, in full or in part, to shares linked to property investments.

When calculating your taxable wealth, you can deduct certain debts that exist as of 1 January of the relevant tax year, provided they relate directly to taxable assets. These may include outstanding mortgage balances and interest, costs linked to building or renovation work, loans used to acquire property-related shares, and certain maintenance costs for rental property. Property taxes such as taxe foncière may also be included.

However, debts linked to exempt assets cannot be deducted. Where assets are only partly taxable, deductions are limited to the same proportion.

Ways of reducing wealth tax

Several mechanisms exist to reduce IFI liability. A discount (décote) applies to those with taxable wealth just above the entry threshold. In addition, a ceiling ensures that the total of income tax and IFI does not exceed 75% of your income.

Donations to eligible charities can reduce the final tax due, and certain types of investment, such as in forests or vineyards, may benefit from partial exemptions.

Which areas pay most wealth tax?

Some 186,000 households received a bill for IFI property wealth tax in 2024, the last year for which a full report was available. Compared to 41 million households assessable for French income tax, that represented about half of one percent. 

Compared to the average tax household in France, those paying IFI draw much more of their income from investments and capital gains: in fact, more so than from work. 

Households paying IFI are found firstly in Paris and the Hauts-de-Seine and Yvelines departments to the west of Paris, followed by Val-de-Marne and Essonne to its south, the Alps – reflecting high prices of ski properties – the Côte d’Azur and the Atlantic coast.

If you leave France: the exit tax

If you move away from France, you may still be liable for IFI as a non-resident if you retain property in the country.

In addition, some individuals may be affected by France’s ‘exit tax’, although this is primarily aimed at wealthier taxpayers with significant shareholdings rather than typical homeowners.

The exit tax is designed to capture capital gains that have built up while you were resident in France, even if the assets have not yet been sold. It may apply if you have been tax resident in France for at least six of the previous ten years and hold substantial shareholdings, generally exceeding €800,000 in value or representing a controlling stake in a company.

The tax is calculated on the unrealised gain as at the day before departure and is usually charged at the flat rate applied to investment income. 

However, in many cases payment is deferred, particularly if you move to a country with appropriate tax agreements with France, such as the UK. In such cases, the tax only becomes payable if the assets are later sold.

If the shares are not sold within a set period – typically two years, or five years for larger holdings – the tax may be cancelled altogether. It is also cancelled if you return to France. A specific declaration must be filed in the year following departure, and ongoing reporting obligations may apply until the position is resolved.