Since 1 January 2018, the Real Estate Wealth Tax (IFI) has been in force, replacing the Solidarity Tax on Wealth (ISF). The major difference between these two taxes is that the IFI exempts practically all financial investments that were previously included in the wealth tax, but luxury real estate is still targeted. As regards the application of this tax, the minimum threshold of €1.3 million and the scales remain the same. Concentrated exclusively on the real estate assets of taxpayers, it is important to focus on the various assets that are excluded from this tax: real estate assets linked to a professional activity.
Exemption for professional real estate
Like the ISF, professional real estate assets are not included in the IFI's calculation. To get out of the IFI's tax grid, these assets must be held and used for the professional activity of one of the members of the tax household. Whatever the nature of the professional activity (commercial, industrial, craft, agricultural or liberal), this real estate assets is no longer subject to this tax as long as it is necessary for the exercise of this activity on a main basis. For the professional activity to be considered as main, it is mandatory that the income related to it corresponds to at least half of the professional income of the owner of the property.
Professional rental: a solution to get out of the IFI
The rental of real estate representing a professional activity is also a form of exemption from the IFI. This professional rental activity implies having a significant real estate portfolio. Indeed, the tax authorities impose two conditions on this possibility of exemption: the amount of income from rental must exceed a minimum of €23,000 and represent more than half of the professional income of the tax household.
The possibility of temporary donation
In order to escape the IFI, it is possible to make a temporary donation to one's children of the usufruct of one or more rented properties. While keeping the bare ownership of the property, it is possible to confer usufruct to one's relatives for several years, thus making it possible to remove these properties from the IFI's tax grid. This transaction transfers the taxation of the property to the name of the new usufructuary while removing it from the bare owner's IFI. Totally free of charge, this arrangement thus makes it possible to optimize taxation while respecting the legislation.