What elements enter the base of the IFI?
The amount of the IFI payable to the tax authorities is calculated from the taxable net wealth. This heritage includes:
- Built and undeveloped buildings (main residences, houses, apartments, cellars, garages, parking spaces, buildings under construction, land, fields and other agricultural land);
- Forests, woods and forest groups;
- Rural property rented over the long term;
- The shares of SCPI (civil real estate investment companies), SCI (civil real estate companies), listed real estate companies and OPCI (real estate collective investment undertakings);
- Under insurance contracts, the repurchase value representative of real estate assets.
The list of deductible debts becomes clearer from year to year. They include (on January 1 of each year) the expenses related to the repair and maintenance of luxury real estate at the owner's expense, construction or enlargement works, as well as the sums paid for the acquisition of goods.
The IFI scale is based on that which was in place for its predecessor, the ISF. The tax brackets as of January 1, 2020 are the same as in 2019.
- Fraction of the net taxable value of property less than € 800,000: 0%
- Fraction of the net taxable value of property between € 800,000 and € 1,300,000: tax rate of 0.50%
- Fraction of the net taxable value of property between € 1,300,000 and € 2,570,000: tax rate of 0.70%
- Fraction of the net taxable value of property between € 2,570,000 and € 5,000,000: tax rate of 1%
- Fraction of the net taxable value of property between € 5,000,000 and € 10,000,000: tax rate of 1.25%
- Fraction of the net taxable value of the estate over € 10,000,000: tax rate of 1.50%
Tax allowances and reductions
People who have to pay the IFI benefit from a 30% reduction on the value of the main residence. In no case may the combined income tax and the amount of the IFI exceed 75% of the taxpayer's income. Donations to associations, foundations and other organizations of general interest give right to a tax reduction of up to 75%. There is however a ceiling for such a reduction: € 50,000 maximum.
The IFI soon to be transformed?
The Senate had adopted an amendment which aimed to convert the IFI into a tax on unproductive wealth, this from 2021. This change only claimed the taxation of goods which did not contribute to investment such as jewelry and yachts, while exempting productive real estate. However, this amendment does not appear in the final text.
For more information on real estate capital tax, see our article "IFI exempt property / Taxable net wealth".