France introduces changes to its wealth tax, maybe making it an ideal destination for you?
Recently France introduced changes to its well-known wealth tax. Instead of levying tax on all assets located in France, one would only be taxed on the value of the immovable property located in the country if the value of that property exceeds 1,3 mio euro. Movable wealth, such as financial securities or shares in companies, is excluded from the wealth tax. Last year France also launched an investor visa allowing foreign investors to obtain permanent residency through substantial economic investments.
The combination of these legislative changes and a pre emigration inheritance planning might just turn France into the perfect destination for relocation. After all, who wouldn’t enjoy spending his days wandering around the Eiffel Tower, shopping at Gallery Lafayette and eating a croissant along the way?
Changes to the wealth tax
The new wealth tax on immovable property replaces as of January 1st, 2018 the wealth tax on all assets located in France.
Natural persons whose immovable property, located in France, has a value exceeding 1,3 mio euro, owe an annual wealth tax on this property (the so called Impôt sur la Fortune Immobilière or IFI). Once the value of the property exceeds 1,3 mio euro, the tax is applied to the part that exceeds 800,000 euro. The rates are progressive and range from 0,5% to 1,5% for those having assets over 10 mio euro.
Even natural persons who are not located in France or who do not qualify as residents owe this wealth tax. Are considered as French immovable assets for the purpose of the IFI: French real estate directly held by the taxpayer or “indirectly” held through entities. In case of a direct holding of the property, the loan that one concludes specifically to acquire, renovate or maintain the French property is in principle deductable from the value of the property.
New immigration opportunities
Apart from tax changes, France also launched immigration initiatives which are designed to attract foreign investors and entrepreneurs. The initiative is often referred to as the French tech Visa or a Talent Passport and gives qualifying foreigners the possibility to obtain a 4-year visa. Even though this scheme qualifies as a residence program and not a citizenship program, acquiring French nationality might be feasible if the corresponding criteria are met after 5 years of legal residence (one of them being language proficiency).
Prior to dreaming about the French passport, we would like to give you a short overview of the requirements for the Talent Visa. The visa is available for entrepreneurs, investors or those engaging in an innovative project. Each category of applicants has to obey a different set of criteria which we have listed for you below.
Entrepreneurs are asked to invest at least 30.000 euro in their project and must establish an economically viable project in France. In this regard, the final approval of the application is at the discretion of the authorities which creates a certain level of uncertainty for the applicant. On the other hand, the requested financial commitment is rather limited.
As an innovator, the applicant must provide evidence of the innovative nature of his project for which recognition by a public body is required. As a rule, there is no need to invest a minimum of monetary funds to qualify for the visa.
However, the most talked about option is the visa that is available to foreign investors. Investors are not asked to set-up a company or to personally engage in economic activities in France. The applicant’s contribution is limited to the economic investment of 300.000 euro in a French company either directly or through a company of which one owns 30%. As such, the investment can be passive and still lead to residency while giving you a chance of creating profitable returns. As this visa is mainly intended for capital funding of startup companies, one must consider it as a high-risk venture. But on the other hand, investing your funds in foreign real estate or government bonds to obtain a passport is also not considered a risk-free undertaking.
We also point out that any applicant should reside on the French territory for at least 6 months during a 12-month period. In practice, it is said that the number of days would not be decisive as it is more important to maintain all necessary ties with France even when abroad. The visa would also be available to your close family members.
In this regard, France might just be the destination for you. Even though the minimum investment level compares to the other residency schemes available in Europe, its lifestyle is often considered more attractive than its Southern neighbours.
If you would like more information on the French visa scheme or the tax consequences of taking-up residency in France, we would be happy to assist you further.