French real estate tax (IFI) : how it applies to foreign owners in France

France’s real estate wealth tax, known as Impôt sur la Fortune Immobilière (IFI), is often misunderstood by non-residents. Introduced in 2018 to replace the former ISF, it applies exclusively to real estate assets, including properties held directly or indirectly by individuals — even those who reside outside France.

If you are a non-resident investor with real estate holdings in France worth over €1.3 million, you may be liable for this tax. However, the rules are precise, and with careful structuring, it is often possible to reduce or eliminate exposure.

Who is subject to IFI ? French tax rules for non-residents

IFI applies to individuals, not companies, based on the value of real estate owned in France as of January 1st each year. For non-residents, only French-situs real estate is included in the taxable base. Foreign assets — including real estate outside France — are not taken into account.

IFI targets both :

• Direct ownership: property held in your own name

• Indirect ownership: property held through transparent entities such as French SCI (Société Civile Immobilière) or foreign companies considered fiscally look-through by France

Note: Corporate entities that are not transparent — such as properly structured foreign companies with legal personality — may shield the underlying assets from IFI if they demonstrate genuine substance and are not pass-through structures.

The €1.3 million threshold: who pays, and how much ?

IFI is due only if the total net taxable value of your French real estate exceeds €1.3 million on January 1st. This threshold is per tax household, not per person.

The taxable base includes :

• Primary or secondary residences in France

• Rental properties (furnished or unfurnished)

• Real estate held through transparent entities

• Indirect property rights (e.g., usufruct, bare ownership)

From this gross value, you can deduct:

• Outstanding mortgage loans (with restrictions)

• Certain debts, taxes and expenses directly related to the property

• A 30% discount on the market value of your main residence (if applicable)

IFI rates are progressive, ranging from 0.5% to 1.5%, depending on the net value of the taxable assets.

What about property held through companies ?

Many non-residents hold French real estate through SCIs or foreign companies. Whether these holdings are subject to IFI depends on their legal and tax transparency:

• Transparent entities (like an SCI): assets are deemed to be owned directly by the shareholder, and thus included in IFI

• Opaque entities (like a properly structured LLC or UAE company): assets may be excluded, but only if the entity is not a mere shell

If the French tax administration considers that a foreign company has no real substance or exists only to avoid IFI, it may re-attribute the underlying real estate to the shareholder and include it in their IFI base.

This is particularly scrutinized for companies based in low-tax or treaty-exempt jurisdictions.

What income is affected ? Does rental activity change the tax ?

IFI is a wealth tax, not an income tax. It applies regardless of whether the property generates income or remains vacant.

Even furnished rentals (LMNP or LMP) are subject to IFI if the property is personally held or held through a transparent company. Unlike other tax regimes, IFI does not exempt professional landlords, except in rare cases where the rental activity constitutes a main business with significant personal involvement.

If you earn rental income from your French property, you must still report and pay income tax separately under the applicable French BIC regime. This is in addition to IFI if the real estate value crosses the threshold.

Can IFI be reduced or avoided ? Structuring tips for non-residents

Yes — with proper planning. Here are some legitimate ways to reduce or eliminate IFI exposure :

• Use opaque companies with real substance (notably UAE or UK limited companies)

• Consider shared ownership or gifting bare ownership to heirs (usufruct structuring)

• Ensure transparency of declared debts, as only qualifying loans are deductible

• Declare property values fairly but accurately, based on recent valuations

• If applicable, claim the main residence discount (30% reduction) for French residents

For certain non-residents, especially former residents of France, a special temporary exemption or transitional rule may apply if returning after a period abroad.

Filing and payment  : what are your obligations ?

Non-residents subject to IFI must :

• File an annual IFI return, usually at the same time as the income tax declaration (mid-May)

• Declare all qualifying assets and debts, with supporting documentation

• Appoint a tax representative in France, in some cases, especially for higher amounts or foreign ownership structures

Payment is due typically by mid-June. Late declarations may trigger penalties and interest, so early preparation is key.

Conclusion : IFI is manageable with proper planning

While France’s real estate wealth tax may appear daunting, it only applies to property in France and offers multiple opportunities for optimization through appropriate structuring.

At Qualifisc, we help non-residents and international clients :

• Assess their IFI exposure

• Optimize real estate ownership structures

• Mitigate tax risks and avoid penalties

• Coordinate with notaries, banks and accountants in France

Contact us now for a confidential tax analysis of your French real estate portfolio.

You may owe less than you think — or nothing at all.