Non-residents French Wealth Tax: All you need to know about taxes on your assets in France.
You will have undoubtedly come across the many heated debates on the legitimacy of the Wealth Tax, known by the abbreviation ‘ISF’ in France, in the French newspapers. For those of you with assets in France, property in most cases, be aware that you are subject to this Wealth Tax (ISF) if the net value of said assets exceeds 1,300,000 € on the 1st of January of the tax year in question.
As a non-resident only your assets located within France are subject to this tax. This includes property, business assets operated in France, and liquid assets deposited in a regular bank account. It is important to note that certain financial investments (shares, debentures, securities, etc.) are exempt from this tax, except:
- Shares exceeding 10% of the equity of a company (located in France) held for at least 2 years,
- Shares of a real-estate company whose real-estate asset is located in France, and owned at over 50% by non-resident individuals.
There is a way to reduce this tax by means of the ‘WT-SME Reduction’ (réduction ISF-PME). To obtain this, it is necessary to make a cash infusion into the equity of a French SME. The subsequent reduction will amount to 50% of the funds invested, with a ceiling of 45,000 €.
By means of offering this reduction the French administration wishes to stimulate the local economy. However, it has also reduced the scope of eligibility in order to minimise the risk of abuse:
- The SME must employ a minimum of two employees, and a maximum of 250, and must either make an annual turnover inferior to 50 million euros or have a total financial statement inferior to 43 million euros,
- The SME must not carry out any financial activity, any real-estate management, or any building work,
- The SME must be subject to Corporate Tax (Impôt sur les Sociétés),
- The SME must have its effective headquarters in the EU, in Iceland, in Norway or in Liechtenstein,
- You must remain a shareholder for a minimum of 5 years.
Here at Maupard we believe that these are the realistic criteria surrounding this unique opportunity. Nonetheless, we also understand that as a non-resident it is not easy to pinpoint the specific SME’s that are eligible under this scheme.
Should this scheme appeal to you, we would be more than happy to help you identify companies that would fulfil this criteria, and even carry out the investigative analysis on your behalf. Moreover, should you not wish your name to appear publically, we can certainly make your contribution anonymous, under the title ‘Specialised funds – appointed by the Administration’.
It is important to note that the reduction must be declared in the form n° 2725, the deadline for which is the 15thJuly, 2016. This particular declaration must be done manually (it is not possible to declare and pay online), which means that the form and adjoining cheque must physically be sent to the responsible Tax Office, or submitted in person.
In our opinion there is still time to take advantage of this scheme, as long as the forms are submitted in advance. We understand that doing this manual declaration can be time-consuming, which is why, at Maupard, we offer to carry out all of the necessary formalities on your behalf whilst keeping you up to speed via your personal client space found on our Company website.
NB: simplification possible
If you have revenue from French sources, but your assets amount to less than 2,570,000 €, the form n° 2725 must be submitted at the same time as form n° 2042, where your revenue from French sources is declared.
Do not hesitate to contact us via telephone +33 (0) 1 53 93 94 20 or [email protected]. Our team of experts will happily assist you with any queries you might have.