French Wealth Tax Declaration 2013
Thursday 06 June 2013
The declaration procedure and calculation for French wealth tax depends on both your residency status and level of wealth.
You are potentially liable for the annual French wealth tax (Impôt de Solidarité sur la Fortune - ISF) if your net wealth is greater than €1.3 million.
Both residents and non-residents with real estate in France are liable, although different rules apply.
For those who are resident in France, all worldwide assets are considered in the calculation.
Non-residents are assessed only on the basis of the value of their real estate in France.
If you relocate to France on a permanent basis foreign assets held outside France are exempt for five years.
There are a range of other reductions and partial exemptions, notably a 30% discount on the main home. Second homes do not benefit from the same reduction.
The applicable date for determination of taxable wealth is 1st January in the year of imposition of the tax; all subsequent changes to wealth and residency during the year are without consequence. So for 2013, it is your wealth as at 1st January 2013 that is used as the basis for assessment.
Those with net taxable assets greater than €1.3 million but less than €2.57 million are not required to submit a separate French wealth tax declaration.
In such circumstances you make your declaration as part of your French income tax return, using the supplementary Form 2042C available for this purpose. In the relevant sections of the form you give the figure of your gross and net assets.
You also need to list on the form those investments and payments which you consider give you an entitlement to a reduction in your wealth tax liability. There is no need to provide supporting documentation.
You will be advised later of the sum owed, which you must pay by the due date or incur an interest rate penalty.
This year those resident in France had until 27th May to submit their return; European and North American residents have until 17th June; all others until 1st July. There are extended dates for those making their income tax declaration on-line.
If have net worth greater than €2.57 million, or you do not submit a French income tax return, then a separate ISF declaration is necessary.
If you are resident in France then the declaration is required by 17 June; if you are a non-resident European you have until 15 July; if non-resident from elsewhere you have until 2 Sept.
The declaration should be made on Form 2725, accompanied by supporting documentation.
You will need yourself (together with your advisors) to calculate the amount owed, and include the payment with the declaration.
Non-residents need to contact the Service des Impôts des Particuliers Non-Résidents, TSA 10010, 10 rue du Centre, 93465 Noisy-le-Grand, Cedex.
The rate of the wealth tax varies from 0.50% at the bottom end, up to 1.50% for wealth in excess of €10 million. It is applied on a fractional basis along the scale.
If you are liable for the tax all wealth over €800,000 is taxable, subject to your net taxable assets being at least €1.3 million.
Late or Erroneous Declaration
If you are late in making the declaration, then an interest charge of 0.4% per month applies, plus a 10% increase in the level of the tax liability, which can be increased to 40% if you fail to respond to a reminder from the tax office to submit the return.
These same interest rate penalties apply if the tax office considers you have inadvertently underestimated your wealth. The penalty can increase to 80% in the event they consider you have been deliberately fraudulent.
That said, there is a tolerance of up to 10% (tolérance du dixième) allowed in the inadvertent under-declaration of assets, when no penalty is applied.
Robert Kent of French tax advisors Kentingtons has a word of warning about the declaration: "The wealth tax declaration, like the income tax declaration, is pure self-assessment. The French tax authorities just trust the figures submitted until they have reason not to. However, getting on the wrong side of the 'fisc' is very bad news indeed; getting caught means that you are branded for life, something that many people moving to France fail to understand. Ignorance of the system only works for so long."
The tax authority has up to six years to challenge any declaration.