French Finance Bill for 2018 – Changes Impacting High Net Worth Individuals

by White & Case LLP

White & Case LLP

The French finance bill for 2018 (the "Bill") enacts several tax changes announced by President Emmanuel Macron. While the Bill contains significant changes impacting corporate and individuals' taxpayers, this overview is intended to highlight only those which are likely to impact high net worth individuals and families.

French Wealth Tax

The French Wealth Tax ("ISF") has been replaced by a new wealth tax on real estate called "IFI" (Impôt sur laFortune Immobilière).

The IFI is limited to French and foreign real estate held directly or indirectly. Non-French tax residents will be liable for IFI only on real estate directly or indirectly owned in France

In relation to indirect ownership, the former ISF used to apply only to French real estate companies held by non- French resident individuals, i.e. companies predominantly invested in French real estate (specifically, companies for which more than 50% of their assets were French real estate assets). Under the ISF regime a non-French resident only had to declare French real estate assets for ISF purposes. Companies with less than 50% of their assets invested in real estate were out of the scope of the ISF.

All real estate assets are in the scope of the IFI, whether held directly or indirectly through companies, and regardless of whether said companies qualify as real estate companies under the above definition.

The Bill provides some limitations in the scope of the tax. Exempt assets include:

  • Real estate which is not affected to the business of operating companies;
  • Participations of less than 10% in an operating company;
  • Holdings of less than 5% in a SIIC (listed real estate company);
  • Holdings of less than 10% in an OPC (investment companies) when such OPC is vested for less than 20% in real estate.

These changes in the definition of "real estate assets" also have adverse effects on the French trust filing obligations. Families managing their estate through trusts investing in companies holding French real estate should assess their potential IFI exposure.

The Bill also limits the deduction of liabilities related to the real estate assets held

Third party debt is deductible from the real estate's value, with some limitations:

  • In Fine or bullet loans are treated as depreciable loans for IFI purposes (computation of theoretical annuities); and
  • If the total taxable assets are worth more than 5 M€ and the related debt amounts to over 60% of the taxable total value, only 50% of the debt exceeding this threshold is deductible for IFI purposes.

Flat tax on capital income

The Bill implements a 33% (or 34%) flat tax on capital income (i.e. on capital gains on movable assets and/or on interest and dividends).

For French tax residents, the 30% flat tax comprises:

  • 12.8% for income tax
  • 17.2% for social contributions (CSG, CRDS, …)
  • 3% or 4% for CEHR (contribution for high earners)

For non-French tax residents, if there is a withholding tax on said revenues, its rate is capped at 12.8% (subject to the more favorable provision of a double tax treaty with France).

Specific social contribution called "PUMa Contribution"

The PUMa contribution has been implemented to finance universal French healthcare. This contribution is only applicable to French tax residents deriving almost exclusively passive income. They are now liable for the PUMa Contribution at a rate of 8% on such passive income. The contribution is not capped.

In order to become liable for PUMa Contribution a French resident has to earn:

  • Less than 3,922 € of active income, and
  • More than 9,807 € of passive income.

Click here to download PDF.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© White & Case LLP | Attorney Advertising

Written by:

White & Case LLP

White & Case LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.