IFI for non-residents: are you concerned?

A British buyer asked us, during the search for a second property in Paris: “Is there a wealth tax in France?” The answer is yes, but with important nuances that the English terminology does not capture. The IFI (Impot sur la Fortune Immobiliere, or real estate wealth tax) is a specifically French tax that applies only to real estate assets, and whose rules for non-residents differ significantly from those applicable to residents.

What is the IFI and at what level does it apply?

The IFI applies to net real estate assets above 1,300,000 euros, assessed on 1 January of each year, after deduction of outstanding loans. If your net real estate assets in France stood at 1,350,000 euros on 1 January 2026, you are liable for the IFI for 2026.

The IFI replaced the ISF (Impot de Solidarite sur la Fortune) in 2018. The fundamental difference: the ISF taxed the entire estate (real estate, financial, movable), while the IFI covers only real estate assets. Financial investments, bank accounts, shares and life insurance are completely excluded from the IFI base. For an investor whose wealth is primarily financial, this reform was a major shift. For a property owner, the impact remained similar.

Which assets enter a non-resident’s IFI tax base?

Only real estate located in France. Your house in London, your apartment in New York, your villa in Dubai do not enter the calculation.

For non-residents, the scope is therefore strictly territorial. This is a notable difference from the regime for French tax residents, who must declare their worldwide real estate portfolio.

The assets concerned include directly held properties (apartments, houses, land), SCI shares or shares in any company holding French real estate (proportionally to the real estate fraction), real property rights (usufruct, bare ownership in certain cases), and real estate held through life insurance contracts or trusts (French law treats the trust as effective ownership by the settlor).

The exclusions: professional real estate assets (used in the context of a professional activity), forests and woodlands under sustainable management commitments (75% allowance), and listed REIT shares (SIIC) if the holding is less than 5%.

How much does the IFI cost at each level of wealth?

For a net real estate portfolio in France of 1,500,000 euros, the IFI amounts to 3,900 euros a year. It reaches 10,900 euros at 2,500,000 euros and approximately 35,700 euros at 5,000,000 euros.

The brackets apply from 800,000 euros (not 1,300,000 euros), which is a subtlety of the tapering mechanism. You are only liable if your portfolio exceeds 1,300,000 euros, but once liable, the brackets start at 800,000 euros.

The bands are as follows: 0.5% from 800,000 to 1,300,000 euros, 0.7% from 1,300,000 to 2,570,000 euros, 1% from 2,570,000 to 5,000,000 euros, 1.25% from 5,000,000 to 10,000,000 euros, and 1.5% above 10,000,000 euros. The calculation runs band by band: at 1,500,000 euros, 500,000 euros are taxed at 0.5% (2,500 euros) and 200,000 euros at 0.7% (1,400 euros), giving 3,900 euros.

These amounts may seem modest relative to the portfolio value, but they accumulate year after year and add to other property taxes (property tax, rental income tax, capital gains tax eventually).

Discover how Home Select supports international buyers

What are the IFI pitfalls for a non-resident?

Three come up every time: the 30% primary residence allowance, which a non-resident can never obtain; the SCI, which provides no shield at all; and dismemberment, where it is the usufructuary who declares the full value of the property.

The primary residence pitfall

The primary residence benefits from a 30% allowance on its value for IFI calculation. This is a significant advantage: an apartment worth 2 million euros enters the IFI base at only 1.4 million if it is your effective primary residence. But for a non-resident, no French property is the primary residence, by definition. A Parisian pied-a-terre used three months a year, even furnished and maintained, is not a primary residence in the tax sense. The 30% allowance does not apply.

The transparent SCI pitfall

Holding a property through an SCI does not allow you to escape the IFI. SCI shares holding French real estate are integrated into the IFI base proportionally to the net real estate value of the company. If the SCI holds an apartment worth 1.5 million euros with a 300,000 euro loan, your shares are valued at 1.2 million euros for IFI purposes.

The poorly calibrated dismemberment pitfall

The principle is as follows: in the case of property dismemberment, it is the usufructuary (holder of the right of use) who declares the full value of the property in their IFI base. The bare owner is not liable for IFI on that property. This is a powerful lever for succession planning, but if you retain the usufruct of a 2 million euro property, you declare it in full, without any discount.

How can you legally reduce your IFI tax base?

Mortgage debt is deductible: that is the most direct lever. A real estate portfolio of 1,600,000 euros financed with 400,000 euros of borrowing falls to 1,200,000 euros net, below the taxation threshold. Temporary bare ownership and donation with reserved usufruct complete the toolkit, with very different effects.

Financing through borrowing

Mortgage debt is deductible from the IFI base. This is the most direct and most effective lever. A real estate portfolio of 1,600,000 euros financed with 400,000 euros of borrowing falls to 1,200,000 euros net, below the taxation threshold. Financing a property purchase as a non-resident takes on an additional wealth dimension here: borrowing is not just a matter of cash flow, it is also a tax optimisation tool.

Important note: since the 2018 reform, deductible loans are subject to a cap. Bullet loans (prets in fine) backed by life insurance contracts are subject to a theoretical straight-line amortisation for calculating the deductible debt. The mechanism is technical, and a specialised tax advisor is essential.

Temporary bare ownership

Bare ownership investment consists of acquiring the bare ownership of a property whose usufruct is held by a third party (often a social housing landlord) for a set period (15 to 20 years). During this period, the bare owner is not liable for IFI on the property, receives no rent, and bears no charges. At the end of the dismemberment, full ownership is recovered without additional costs. This is an investment vehicle particularly suited to IFI-liable taxpayers who wish to invest in Paris without increasing their tax base.

Donation with reserved usufruct: a trade-off to consider

Donating bare ownership to your children while retaining usufruct is an early succession strategy. For IFI purposes, it cuts both ways: you remain liable for IFI on the full property value (as usufructuary), but you reduce your succession estate. The benefit is primarily for succession, not IFI.

Can a tax treaty exempt you from the IFI?

Rarely. Most French bilateral treaties grant the right to tax real estate to the country where the property is located, so France can tax your French real estate even if you are a resident of a treaty country.

Still, systematically check whether your country of residence has signed a tax treaty with France covering wealth tax. Some treaties provide for a tax credit or elimination of double taxation if your country of residence also taxes wealth.

English-speaking countries such as the United States and the United Kingdom do not levy an annual net wealth tax, so the double taxation question generally does not arise. For residents of Switzerland, Spain or Norway (which do have wealth taxes), the tax treaty is an essential document to review with your advisor.

How do you file the IFI when you live abroad?

With form 2042-IFI, attached to the main 2042 income tax return and filed online at impots.gouv.fr in May each year. Each property is declared individually with its address, its estimated market value on 1 January, and outstanding loans.

The estimation of market value (fair market value) is the taxpayer’s responsibility. There is no official IFI value database. You must estimate the market value of your properties yourself. Available tools include notarial references (the DVF database, Demandes de Valeurs Foncieres), online estimates (MeilleursAgents, Seloger), and professional valuations. In the event of a tax audit, the administration may challenge your estimate, hence the importance of documenting your method.

At Home Select, our knowledge of the Parisian market arrondissement by arrondissement, backed by over 1,200 transactions since 2011, enables us to guide our clients towards reliable and defensible value estimates. The IFI question arises as soon as the purchase budget exceeds one million euros, and it deserves to be integrated into the overall wealth strategy, alongside the secondary residence or pied-a-terre.

Let’s discuss your Paris purchase project and your wealth situation

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