A comparison of the Impôt sur la Fortune (IFI) in France and Israel raises some interesting questions about the differences between the two tax systems. While France applies the IFI to certain assets, It is important to note that there is no wealth tax in Israel.. This article aims to shed light on these differences and provide an in-depth understanding of these two tax systems.
In a nutshell – Israel what difference does the IFI make?
In France, the IFI applies to people whose net real estate assets exceed 1.3 million euros. This valuation includes all real estate, whether used for personal purposes or rented out, with the exception of professional property, woods and forests, and rural property leased under long-term leases.
The principal residence benefits from an allowance of 30 %. The IFI is calculated according to a progressive scale, starting at 0 % for a fraction of the value of assets up to €800,000 and rising to 1.5 % for fractions of value over €10,000,000. There is also a discount system for net taxable assets between €1.3 million and €1.4 million.
In Israel, there is effectively no wealth tax, which marks a significant difference from the French tax system. The Israeli tax system is based on progressive, income-based tax rates, and offers certain tax advantages, particularly for new immigrants.
In France, the IFI is designed to tax real estate assets and contribute to the government's tax revenues, although its economic efficiency and impact on real estate investment choices are the subject of debate. In Israel, despite the absence of a wealth tax, the progressive tax system and the taxation of different types of income generate significant tax revenues.
Property wealth tax in France (IFI)
In France, the Impôt sur la Fortune Immobilière (IFI - property wealth tax) is a tax levied on individuals whose net property value exceeds a certain threshold. The IFI is based on the declaration and valuation of the taxpayer's real estate holdings. It is important to note that there is no wealth tax in Israel, which is a major difference between the two tax systems.
Regarding tax rates and the threshold for application of the IFI in France, the tax applies when the net value of real estate assets exceeds 1.3 million euros. Tax rates vary according to the value of the assets, ranging from 0.5% to 1.5%.
Here are a few examples of properties subject to the IFI in France:
- Primary residences (with allowance) and secondary residences.
- Rental properties.
- Building lots.
- Shares in non-trading property companies (SCI).
As far as revenue generated by the IFI in France is concerned, the tax brought in around 2.35 billion euros in 2022. Although the IFI represents a source of revenue for the French state, its economic efficiency and relevance are the subject of debate.
Taxation in Israel
Unlike France, Israel has no wealth tax. This important difference is part of a distinct Israeli tax system, with several notable features.
The Israeli tax system is based on progressive tax rates, which vary according to income. Israeli residents are taxed on their worldwide income, while non-residents are taxed only on their income from Israel. In addition, new immigrants benefit from tax advantages, including exemption from foreign income tax for 10 years.
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When it comes to taxing different types of income, there are differences between active income (such as salaries) and passive income (such as rental income or dividends). This distinction makes it possible to take into account the specific features of each source of income and apply appropriate tax rates.
Tax comparison between France and Israel
The absence of a wealth tax in Israel is a major difference between the two tax systems. Let's take a look at the advantages and disadvantages of the IFI in France, its economic efficiency and a comparison of the tax revenues generated by the IFI in France and taxes in Israel.
The IFI in France has certain advantages, such as contributing to tax revenues and redistributing wealth. However, it also has its drawbacks, notably the complexity of its application and criticism of its economic efficiency. Indeed, some believe that the IFI may encourage wealthy taxpayers to invest more in tax-free assets, such as securities, rather than real estate.
When it comes to the economic efficiency of the IFI in France, opinions are divided. On the one hand, the IFI contributes to tax revenues and may encourage a certain redistribution of wealth. On the other, it is criticized for its lack of economic efficiency, particularly in terms of encouraging real estate investment. In addition, its application can be complex, generating administrative costs for both taxpayers and tax authorities.
A comparison of tax revenues generated by the IFI in France and taxes in Israel shows that the absence of a wealth tax in Israel does not prevent the country from collecting substantial tax revenues, thanks to its tax system based on progressive tax rates and taxation of different types of income. So, although the French and Israeli tax systems differ in terms of wealth taxation, they both manage to generate substantial tax revenues to finance public services and infrastructure.
Tax services offered by Dray & Natco
Dray & Natco stands out for its expertise in Israeli taxation. Drawing on our experience and in-depth knowledge of the local tax system, the experts at Dray & Natco are able to offer a comprehensive range of services to help their clients manage their tax affairs in Israel.
Dray & Natco's services include business start-up, accounting and tax consulting. Whether you're an individual or a company, the experts at Dray & Natco can help you optimize your tax situation and comply with Israel's legal requirements. Our professional and informative approach ensures that you receive advice tailored to your specific needs and situation.
As an accounting and tax firm in Israel, Dray & Natco is well aware of the absence of wealth tax in the country. This specificity of the Israeli tax system is taken into account in the advice and services offered by the firm, which strives to provide solutions adapted to the local reality.
Optimize your tax situation
In short, the absence of a wealth tax in Israel represents a major difference from the IFI in France. Understanding the specifics of each tax system is essential to optimizing your tax situation. For personalized advice and tailored support on Israeli tax issues, contact the experts at Dray & Natco. With our expertise in taxation and our wide range of services, we can guide you towards the best solutions for your situation.