Focus on IFI: Direct or Indirect ownership?

The tax on real estate wealth (IFI) is a tax that can affect both residents and non-residents of France.

People domiciled in France for tax purposes must declare their assets located in France and abroad if the net value of their real estate assets exceeds €1.3 million.

New impatriates benefit from an exemption on their real estate located abroad until the end of the 5th year following their installation in France.

Non-residents are only liable for real estate wealth tax on their real estate located in France and exceeding the threshold.

The “resident” or “non-resident” taxpayer may, however, be in two situations of ownership, direct or indirect ownership, which leads to different methods of determining the basis of taxable assets.


The taxpayer holds the property in his own name and not through a legal entity such as an SCI. As regards to the main residence, the 30% allowance of the market value is only applicable in the case of direct ownership. 

The IFI calculated in this way relates to the net value of your real estate assets on 1 January of the year, i.e. after deduction of debts existing on 1 January of the year, provided you can justify them. Various debts can reduce the IFI taxable base in the case of direct ownership, such as :

  • Bank loans for the acquisition or construction of a property. However, some loans are subject to special deductions, such as bullet loans. 
  • Debts inherent to the real estate assets such as 
    • Debts related to repair, maintenance or reconstruction expenses; 
    • Taxes relating solely to real estate: property tax, tax on vacant homes, IFI
  • Some properties are even totally or partially exempt from IFI:
    • Professional property;
    • Shares in forestry groups… ;


Indirect ownership means that the taxpayer holds a property through company shares. These company shares are only liable to the IFI for the fraction of their net value representing real estate assets or rights. 

In this sense, the calculation of the taxable fraction is done in several steps: 

Carry out a valuation of the company’s shares; 

Calculate the company’s property ratio (market value of the taxable property or property rights held by the company / market value of all its assets); 

Apply a specific allowance for illiquidity of the shares. 

However, care must be taken as to whether or not certain debts such as partners’ current accounts are deducted.

Finally, in both cases of ownership, there are certain deduction ceilings, in particular when the market value of the assets exceeds 5 million euros and the amount of the debt exceeds 60% of this value. 

Do you have any questions? Contact our international tax team for further information.

Briefing note wrote by Maud MESTRE – Tax Manager at RUFF & ASSOCIÉS

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