Bricks and mortar and the Solidarity Tax on Wealth (Impôt de solidarité sur la fortune – ISF) are often intimately linked. Here’s a review of the rules on how this tax operates and some advice on how to best evaluate your real estate assets.

Often real estate goes hand in had with the Solidarity Tax on Wealth. In the face of 15 years of rising property prices, today it suffices to own a Parisian apartment and/or a second home in a popular coastal or ski resort and this tax becomes payable.

Properties subject to tax

The tax applies to all property (apartments, houses, buildings, parking garages, land for development, farmland and so on) except for those with professional use (classed as ‘Loueur Meublé Professionnel (LMP)’ – professional furnished rentals, or farm buildings).

Note: when a property is classed as a principal residence the taxpayer benefits from a 30% reduction in the property’s value for tax assessment purposes.

Other properties (rental properties etc.) however, are taxed at 100% of their market value.

How to evaluate a property

In order to conduct a true and objective assessment of a property, it is important to keep up to date with price developments, market adjustments; and to determine the average price applicable in that district, not forgetting to verify the surface area of the space.

Note: for rare or unusual properties that are difficult to assess for want of comparisons, it is best to turn to the services of a property expert.

The tax rules

A taxpayer is affected by the Solidarity Tax on Wealth as soon as the net taxable value of their property portfolio exceeds €800,000 (on 1 January 2015).

Once a Solidarity Tax tax return is submitted, the tax office is within its rights to request clarifications or justifications concerning the evaluation of such and such a taxable property. This occurs when the tax office suspect an under-valuation. Any under-valuing of the price is detectable because the tax inspectors’ method is to compare the prices of similar properties in the same quartier.

Note: a number of strategies can reduce the burden of the Solidarity Tax on Wealth, notably, dividing up the property