French Real estate wealth tax (IFI): new deductibility rule for bullet loans contracted by a company

Current French real estate wealth tax rules provide that bullet loans directly contracted by a taxpayer is deductible only up to the total amount of the loan less a tax depreciation based on its duration. So far bullet loans granted to interposed companies were fully deductible for the valuation of the company’s shares until maturity date.

As from 1 January 2019 onwards, taxpayers holding real estate in France through a company would be subject to the same rules as taxpayers owning a property in their own name.

If this measure is definitively adopted in the Finance Act, it could be necessary to review current French real estate ownership structures. Obviously, the banks will have to review their current credit offering and potentially sign loan amendment agreement with their clients in order to draw the consequences of such reform.