The Content Of The Article:
  • 2. Finance Act 2018: abolishment of the housing tax
  • 3. What will become of the 2018 ELP?
  • 4. Finance Act 2018: the flat tax, what is it?
  • 5. Should we expect a rise in mortgage interest rates in 2018?
  • Article 12 of the draft Finance Law 2018 was adopted on October 20, 2017 for application from 2018, which resulted in the substitution of the ISF, the tax on the fortune, by the IFI, the tax on real estate fortune. Only real estate not assigned to the business activity of the owner is subject to the IFI.

    ISF and IFI: main differences

    The wealth tax that has existed for more than thirty years included financial investments, savings or all other securities of a taxpayer in addition to real estate. This will no longer be the case for the calculation of IFI which will only apply to real estate assets.
    As a result, more than half of the taxpayers currently paying TFR will no longer be affected by the IFI since all real estate less than 1.3 million will not pay IFIs regardless of whether they have life insurance policies, booklets or other movable property.

    However amendments have been adopted to increase the taxation of sports cars, yachts or precious objects.

    What does not change

    • The IFI scale resumes the threshold of the current ISF, ie a tax levy of 1.3 million euros;
    • The 30% abatement on the main residence;
    • The tax scale consists of 6 tax brackets as shown below;
    • The cap device: limits the amount of all taxes combined to a maximum of 75% of the taxpayer's income over a year;
    • The ISF-don: payment to organizations of general interest, 75% of which are deductible from the IFI up to a limit of 50,000 euros.

    IFI scale (real estate tax)

    Taxable net worth of real estate assets (Pi)Applicable rate (%) as of January 1, 2018
    Pi <800 000 €0.00
    800,000 0.50
    1,300,000 0.70
    2,570,000 1.00
    5,000,000 1.25
    Pi> 10,000,000 €1.50

    Be careful these figures are likely to evolve.

    What is still uncertain for the IFI

    The share invested in real estate in REIT (1) or OPCI (2) even through life insurance (which is normally excluded from the IFI) could be taxable to this Property Tax.

    To note Existing direct debits on financial investments not subject to the IFI will be subject to a flat tax levy of about 30% on savings income.

    (1) SCPI: Civil Real Estate Investment Company. It is the acquisition and management of rental real estate assets in order to obtain a return.
    (2) OPCI: real estate collective investment scheme. It is a long-term savings that allows on the one hand to make a financial investment and on the other hand to keep his savings when needed.

    Video Instruction: NEW Tax Bill 2018 - How will it affect real estate investors?