France wealth tax (IFI): rates, rules and exemptions for non-residents

A ski chalet in Val Thorens, a renovated farmhouse near Alpe d’Huez, an apartment in Grenoble: property values in the French Alps mean that international buyers can cross into France’s wealth tax territory without necessarily intending to. The tax in question, the Impôt sur la Fortune Immobilière (IFI), is one of the more misunderstood aspects of owning property in France, particularly for people who do not live here.

This guide sets out how the IFI works: who it applies to, how it is calculated, what can be deducted, and where genuine exemptions exist. It is general information rather than personalised advice; because so much depends on how a property is owned, financed and structured, it is advisable to have your own situation reviewed by a notaire rather than relying on this guide alone. For the wider tax picture beyond the IFI, see our overview of taxation in France.

What the IFI is, and how it differs from the old wealth tax

Until 2018, France applied a broad wealth tax (the ISF) covering worldwide assets: property, savings, shares, and more. Since 1 January 2018, the ISF has been replaced by the IFI, which applies only to real estate. Bank balances, share portfolios, jewellery, art and vehicles generally fall outside its scope, unless they are tied to real estate (for example, shares in a company whose main asset is a French property).

A common assumption among foreign buyers is that living outside France means being outside the reach of French tax. For the IFI, this is not the case: owning French real estate above the threshold brings a French tax liability regardless of where the owner lives, and overlooking it can lead to a tax reassessment and penalties once the position is reviewed.

Who is affected: residents and non-residents

Liability depends first on the value of the property, and then on where the owner is tax resident.

Example: two owners, two outcomes. A Grenoble-based French tax resident with a €1.5 million home in Grenoble and a €600,000 flat in Portugal would, in principle, count both towards the IFI threshold. A British non-resident who owns only a €1.8 million chalet in Val Thorens, with no other French property, is assessed on that chalet alone; assets held outside France do not enter the calculation.

What counts, and what does not

The taxable base covers a wide range of real estate interests, and it catches indirect holdings as well as direct ownership.

How the tax is calculated: thresholds and rates

The trigger threshold is €1.3 million of net taxable real estate wealth on 1 January. Once that line is crossed, the calculation itself starts from a lower figure, €800,000, and applies progressively.

For anyone whose taxable wealth sits between €1.3 million and €1.4 million, a discount (décote) softens the entry into the tax: the reduction is calculated as €17,500 minus 1.25% of the net taxable wealth, subtracted from the tax otherwise due. This is a genuine, if modest, cushion around the threshold that is worth factoring into any calculation close to that mark.

Worked example. A non-resident owns an Alpine chalet valued at €1.6 million, with no outstanding mortgage. The tax is calculated by applying the brackets progressively: nothing on the first €800,000, 0.5% on the next €500,000 (€2,500), and 0.7% on the remaining €300,000 (€2,100), for a total of roughly €4,600 before any applicable deductions. Because the property carries debt in many real-world cases, the deductions covered in sections below usually bring this figure down further.

Exemptions and reductions worth knowing about

The 30% primary residence deduction

Owners of their actual main home in France can deduct 30% of its market value before calculating the IFI. For a French tax resident living permanently in, say, Grenoble in a house worth €1.5 million, this reduces the taxable value to €1.05 million, potentially below the threshold altogether once other assets are accounted for.

This deduction does not extend to second homes, and by its nature, it is rarely available to non-residents, since a French property that is only used for holidays is not, for tax purposes, anyone’s main residence. A British owner whose main home is in the UK and whose €1.5 million chalet in Alpe d’Huez is a holiday home is assessed on the full €1.5 million, with no 30% relief on that property.

Furnished rental property: LMNP and LMP make a real difference

Many Alpine buyers let their property as a furnished holiday rental, and the distinction between LMNP (non-professional) and LMP (professional) status matters here more than it might first appear. A property let as LMNP remains inside the IFI base like any other. A property let under LMP status can, however, qualify as a “professional asset” and fall outside the IFI base entirely, provided the activity meets several cumulative conditions, broadly: rental receipts above €23,000 a year, and rental income representing more than half of the household’s professional income. In practice, few holiday-let owners meet the second condition, since it is a demanding threshold, but for those running a substantial rental business, the difference between LMNP and LMP treatment for the IFI can run to several thousand euros a year. We look at furnished letting in more depth in our guide to French property rental income and taxation.

Donations to charity

A reduction equal to 75% of donations made to qualifying general-interest organisations applies, capped at €50,000 of reduction. This is a straightforward, often overlooked way to soften an IFI bill for owners who already give to charitable causes.

Business assets and Dutreil-pacted shares

Real estate used for a taxpayer’s own principal professional activity (a working farm, premises used by an operating business the owner actively runs) can be excluded as a “professional asset.” Company shares covered by a valid Dutreil commitment can, under specific conditions, also fall outside the IFI base. This is a genuinely technical area, closely tied to how a business or a family holding structure is organised, and it is worth raising directly with a notaire or with the business and company law side of a structure, rather than assuming it applies.

Deductible debts: what reduces the taxable base

The IFI is charged on net taxable wealth, so debts existing on 1 January can be deducted, provided they can be justified and relate to the taxable property.

Typically deductible:

• Outstanding mortgage capital used to buy, build, repair or extend the property
• Unpaid property tax (taxe foncière) still owed at 1 January

The “in fine” loan point. Interest-only (in fine) mortgages were once used to keep the outstanding balance artificially high for IFI purposes throughout the loan’s term. The rules have since closed this off: for IFI purposes, an in fine loan must now be treated as if it were amortising in a straight line, so the deductible amount shrinks each year regardless of how the loan is actually structured with the bank.

A financing point worth anticipating. A loan taken out with a bank outside France, not specifically and formally tied to the French property acquisition, can be challenged by the tax authorities as a deductible debt for IFI purposes, even where the funds were genuinely used to buy the property. Structuring the financing as an earmarked loan (prêt affecté), typically alongside a registered French mortgage or privilège de prêteur de deniers, tends to remove this uncertainty. This is one of several reasons it helps to involve a notaire while a financing structure is still being put together; see our page on mortgages and loan security.

Getting the valuation right

Because the IFI is based on the property’s market value each 1 January, valuation is where most disputes with the tax authorities start. Using a purchase price from several years ago, or a deliberately conservative estate agent estimate, to stay under the threshold is a recognisable pattern that the tax authorities are well placed to identify, since they have direct access to comparable sale prices through their own databases.

If a property is found to have been undervalued, the consequences can include a reassessment for the years concerned, plus interest, and a penalty that can reach 40% of the tax due where the omission is considered deliberate. A reasoned, evidence-based valuation, referencing genuinely comparable Alpine sales rather than a round number, is a more solid starting point, and our real estate team can help establish one where needed.

Usufruct and bare ownership: a more nuanced picture than it first appears

Splitting ownership into usufruct (the right to use a property or receive its rental income) and bare ownership (the right to the property itself, taking full effect when the usufruct ends) is a long-standing estate-planning tool in France, and it is sometimes presented as a straightforward way to reduce IFI. The reality is more nuanced.

The general rule is that the usufructuary declares the property at its full ownership value, and the bare owner declares nothing. This applies whether the usufruct arises from a gift, a will, or a private arrangement between family members. In practice, this means that a parent who gifts bare ownership of an Alpine chalet to their children while keeping the usufruct does not reduce their own IFI bill by doing so: the parent continues to be assessed on the full value for as long as they hold the usufruct. What it does achieve is keeping the property, at least for now, out of the children’s own IFI calculation, and out of a future estate altogether once the usufruct eventually ends.

A narrower exception allows the value to be split between usufructuary and bare owner, according to an age-based scale, but only in specific situations set out by law: principally, a surviving spouse’s legal usufruct, or a sale (rather than a gift) where the seller keeps the usufruct and sells the bare ownership to someone who is not an heir, a family member, or another closely related party. A family gifting bare ownership of a chalet to their own children, the more common Alpine scenario, sits outside this exception.

None of this makes démembrement a poor planning tool; it remains a genuinely useful way to plan a gradual, tax-efficient transfer of a chalet or apartment to the next generation, as we discuss in our article on joint ownership of French property. It simply is not, on its own, a lever for reducing the donor’s own IFI bill while they are alive, and it is worth going into any démembrement structure with that distinction clear from the outset.

Holding property through an SCI

Buying through a French Société Civile Immobilière (SCI) is a frequent choice for families sharing an Alpine property, or planning its transmission over time. Because SCI shares are less liquid than direct ownership, tax authorities generally accept a discount (décote) of around 10% to 15% on the value of the shares for IFI purposes, on top of any other applicable deductions.

Off-the-shelf statutes downloaded online rarely reflect a family’s actual situation, marital regime, or cross-border succession considerations, and a poorly drafted SCI can create more difficulty than it resolves further down the line. Tailored statutes, drafted with the family’s structure and long-term plans in mind, are usually the more solid foundation; our page on business and company law covers this in more detail, alongside the wider question of buying French property through a company.

Non-residents and double taxation

France has signed tax treaties with more than 120 countries, including the UK, the US, Canada and the UAE. Real estate is, under almost all of these treaties, taxable in the country where it is located, so France retains the right to apply the IFI to a French chalet or villa regardless of the owner’s country of residence.

Where a home country also levies a comparable wealth tax, most treaties provide a mechanism, typically an exemption or a tax credit, to avoid taxing the same value twice. Applying these mechanisms correctly depends on the specific treaty in question, which varies from one country to the next, and is another area where it is worth having the position checked rather than assumed.

Reporting requirements

The IFI is declared alongside the annual income tax return, using form 2042-IFI, generally between late April and early June (for the 2026 filing year, non-residents’ online deadline fell on 21 May). Non-residents who do not otherwise file a French income tax return must also complete the identification form 2042-IFI-COV alongside it.

Filing is required even where French income is nil: if net French real estate wealth exceeds €1.3 million on 1 January, a return is due. The tax authorities do not generally send a reminder in advance of a missed deadline; a late or missing return is more likely to result in a penalty notice than a courtesy prompt.

Common pitfalls: a quick reference

Conclusion

The €1.3 million threshold might look distant in the abstract, but Alpine chalet prices, and prestige property prices more widely, mean many international buyers reach it without particularly trying to. Understanding how the IFI is calculated, what genuinely reduces it, and what does not, is a reasonable amount of groundwork before a purchase, a gift, or a change in financing, rather than after.

A notaire, reviewing the position as an impartial public officer rather than a commercial adviser, can look at valuation, debt structuring, SCI statutes and cross-border treaty questions together, rather than one at a time, which is usually where the most useful adjustments come from.

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