This month: who has to pay it?

If your assets in France are valued over 790,000 euros you may have to pay wealth tax. The basis used for the computation varies depending on whether you are a French tax resident or not. If you are a nonresident, only real estate assets in France are taken into account. Other assets, here or abroad, are taxfree. If you are a new resident in France (from 6th of August 2008) you are taxed during the first five years of your residency only on those assets that you have here and not those that are based in another country.

If a debt is clearly linked to an asset (eg. a mortgage), you can deduct the amount outstanding from the value of the assets taken into account for the wealth tax computation. Thus, it is usually preferable to finance a large property, for example worth over a million euros, with a loan. If  the financing is done some time after the purchase (refinancing or with an equity release mortgage), it is usually not possible to deduct it from the total tax sum. Nevertheless, if the money borrowed is undoubtedly used to invest in a taxable asset it can be deducted. In this light, it is important to structure your assets as early as possible.
Though, some kinds of assets are not taxable, such as a manager  or director having a shareholding of more than 25 per cent in his own company, antiques (over 100 years old), classic cars, copyrights etc.
What can be done? The tax basis is always the market value of the  assets (usually real estate), after deduction of debts. As real estate prices French wealth tax usually rise, a high loan-tovalue ratio combined with an interest-only loan enables you to minimize the taxable basis in the long term.
If you are looking for 100 per cent finance, the bank will require an extra guarantee, such as a secured deposit in its books.
Whether an investor goes to a French or foreign bank depends on their current and future personal situation (where they are and will be resident), how much is to be borrowed, in which currency and what kind of amortization system is adopted.
RFP, an independent financial adviser on the French Riviera, works with banks in France and abroad (Monaco, Switzerland and Luxembourg) and can help you find and plan the best solution for you.

Riviera Financial Planning
Independent Financial Advisor
and Mortgage Broker
Tel: +33 (0)4 93 00 11 26