-5.2% in Paris, -4.4% in Lyon, -1.7% in Lille… In a year, prices real estate in France is decreasing significantly. A decline that is not related to the sharp increase in interest rates, which makes it very difficult for a large number of households to access bank loans. But this downturn in the real estate market also has another consequence: this fall, the 164,000 taxpayers responsible forproperty tax (IF I WOULD). Because if the IFI declaration is actually made in the spring, the value of the immovable property communicated to Bercy corresponds to the value established on January 1 of the tax year. What valuation should you choose in this bear market context when it may be tempting to undervalue your property on January 1st? What risk can result from undervaluation of assets? Capital asked Valentine Roulin, a real estate tax attorney at Arsene.
Can you remember the main characteristics of the property tax (IFI)?
Valentine Roulin: From January 1, 2018 property tax replaced property tax (ISF). All real estate assets held directly or indirectly by the taxpayer are affected by the MFI. As are properties held through companies. Important point: to be liable for MFI, a taxpayer must have net taxable assets (after deducting debts) of at least 1.3 million euros as of January 1 of the tax year.
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What are the procedures for reporting this property tax?
Property tax is declared by taxpayers online during the tax return period. But, and this is the key point, the value of the real estate communicated in the spring to the tax administration is that which was determined on January 1 of the tax year (January 1, 2024 for the IFI declaration 2024, editor’s note). That is then only in the fall, usually on September 15 or sometime later November 15that the tax must be paid.
You raise the issue of real estate valuation. How is it established?
The valuation of the immovable property is a crucial element as it ultimately determines the amount of IFI paid by the taxpayer. The rule is to give the tax administration the market value of the property, namely the market price for which the accommodation would be sold. The taxpayer must therefore put himself in the shoes of a potential seller. An exercise that can be tricky when the real estate market fluctuates like it has in recent months.
Real estate is falling sharply this fall. What are the implications for real estate valuation?
Whether the market is bullish or bearish, the important thing is to be consistent with the latter. Discounting the property compared to the previous declaration to the tax authority is not a problem in itself, if you are able to document the amount stated by you. And you must be able to demonstrate this through objective elements: the overall condition of your home, the current purchase price, comparison with properties sold in your building, etc.
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Some taxpayers may be tempted to significantly reduce the value of their properties in 2024. What could be the risks of such a strategy?
Insufficient declaration is automatically sanctioned by the payment of late payment interest at the rate of 0.2% per month. Significantly undervaluing your real estate means taking the risk of having to pay the property tax you reduced by an increased 2.4% per year. In addition, the statute of limitations is three years, or even six years in the absence of a declaration. In addition to late payment interest, the taxpayer may also receive penalties of 10 to 40% of the tax owed, up to 80% in the case of abuse of rights. Such as gross dismemberment of property.
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