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Do I have to pay the IFI on an apartment in Israel?

IFI on an apartment in Israel

The Impôt sur la Fortune Immobilière (IFI) applies to French tax residents with net taxable property assets in excess of 1.3 million euros. Real estate taxation in Israel has its own peculiarities and international tax obligations, which are crucial to understand for owners of apartments in Israel subject to the IFI.

Tax residence in France and Israel

Tax residency is a key concept in understanding the implications of the Impôt sur la Fortune Immobilière (IFI) on an apartment in Israel. Indeed, tax residency determines the extent of IFI liability and reporting obligations.

Definition of tax residence

Tax residence is the place where a person is considered to be domiciled for tax purposes. Several criteria can be taken into account to determine tax residence, such as place of habitual residence, center of economic interests or principal place of residence. The tax laws of France and Israel each define their own notion of tax residence.

Distinction between French and Israeli tax residents

A French tax resident is a person who has his or her tax domicile in France, i.e. who habitually resides in France, has his or her home there or has his or her center of economic interests there. An Israeli tax resident is a person whose center of life is in Israel. International tax treaties, such as the between France and Israel, establish rules to resolve situations of double tax residence and avoid double taxation.

IFI implications for an apartment in Israel

French tax residents are subject to the IFI on all their real estate assets, whether located in France or abroad, including apartments in Israel. Israeli tax residents, on the other hand, are not concerned by the IFI on their real estate in Israel, as this tax is specific to France. However, it is important to take into account other taxes on property in Israel, such as acquisition tax, property tax (Arnona) or rental income tax.

It is essential to fully understand your tax residence situation and your IFI obligations on an apartment in Israel, to avoid penalties in the event of non-compliance with reporting or statute of limitations rules. We recommend consulting a tax expert to help you navigate international tax obligations and optimize your tax situation.

IFI on foreign property

The Impôt sur la Fortune Immobilière (IFI) applies to French tax residents with net taxable real estate assets in excess of 1.3 million euros. It is important to note that this tax obligation also applies to real estate located outside France.

Applicability of the IFI to property outside France

French tax residents are subject to theIFI on all their real estate assets, whether in France or abroad. This includes apartments, houses, land and other real estate located in other countries, including Israel. It is therefore essential for owners of apartments in Israel to take this tax obligation into account and declare these assets in their IFI return.

Impact of international conventions

France has signed a number of international tax treaties, including with Israel, to avoid double taxation and facilitate the exchange of tax information between countries. These agreements determine the rules applicable to the taxation of real estate held abroad, as well as the tax credit or exemption mechanisms provided to avoid double taxation.

The special case of an apartment in Israel

Apartments in Israel owned by French tax residents are subject to the IFI in France. However, it is important to take into account the specificities of real estate taxation in Israel, such as the acquisition tax, the property tax (Arnona) or the tax on rental income. Buying an apartment in Israel via a bank loan can also have an impact on the IFI and offer potential tax advantages.

Summary of tax benefits for new immigrants and returning citizens.

It is essential to understand your tax residence situation in France and Israel, as well as the rules applicable to the IFI on an apartment in Israel. The statute of limitations, i.e. the period of time after which the tax authorities can no longer reclaim taxes, is also a factor to be taken into account when managing your tax obligations.

IFI declaration for French tax residents

French tax residents with net taxable real estate assets in excess of €1.3 million, including apartments in Israel, are subject to the Impôt sur la Fortune Immobilière (IFI) tax on real estate wealth, and must meet certain reporting obligations to comply with tax legislation.

IFI reporting obligations

French tax residents must declare all their real estate assets, whether located in France or abroad, in their IFI return. This includes apartments in Israel. It is important to respect the declaration deadlines to avoid penalties for non-compliance with tax obligations. The IFI declaration must be filed at the same time as the tax return, generally in May of each year.

Prescription and declaration deadlines

The statute of limitations is the period of time after which the tax authorities can no longer reclaim taxes. In the case of the IFI, this period is generally three years from the date of declaration. It is therefore important to keep all supporting documents relating to the IFI declaration during this period, in order to be able to respond to any requests from the tax authorities.

Assistance from a chartered accountant to optimize your declaration

To optimize the IFI declaration and ensure compliance with tax obligations, it is advisable to call on the services of a chartered accountant. Our firm of chartered accountants has in-depth knowledge of real estate taxation in Israel and can help you with the IFI declaration for an apartment in Israel. By calling on the services of a chartered accountant, you can benefit from personalized advice to optimize your tax situation and avoid the potential penalties associated with non-compliance with tax obligations.

Property taxes in Israel

Understanding the different taxes associated with property ownership in Israel is essential for apartment owners subject to the Impôt sur la Fortune Immobilière (IFI) in France. This will enable you to take into account Israel's specific tax obligations and optimize your tax situation.

Main types of property tax in Israel

The main taxes related to property in Israel are :

  • Acquisition tax: this is a tax levied on the purchase of real estate in Israel, the rate of which varies according to the value of the apartment and the status of the owner (resident or non-resident). Tax rates range from 0% to 10%.
  • Property tax (Arnona): this tax is levied by municipalities and depends on the size, location and use of the apartment. The amount of Arnona is generally expressed in shekels per square meter and varies from city to city.
  • Tax on rental income: owners of apartments in Israel who receive rental income must declare it and pay tax on it. The amount payable depends on the tax regime chosen (total or partial exemption, taxation at the linear rate of 10% or taxation at the progressive scale).

Amount payable based on apartment value and tax rate

The amount of property tax in Israel depends on the value of the apartment and the applicable tax rate. For example, the acquisition tax varies according to the value of the apartment and the status of the owner, while the property tax (Arnona) depends on the size, location and use of the apartment. Rental income tax is calculated on the basis of income received and the tax system chosen.

It is therefore important to understand the various taxes associated with property ownership in Israel and their impact on the IFI in France. Owners of apartments in Israel subject to the IFI can benefit from the expertise and advice of an accounting firm, to optimize their tax situation and meet their tax obligations in France and Israel.

Buying an apartment in Israel with a bank loan

The purchase of an apartment in Israel via a bank loan may have an impact on the Impôt sur la Fortune Immobilière (IFI) and offer potential tax advantages for owners subject to this tax in France. Understanding these implications is essential to optimize your tax situation.

Impact of borrowing on the IFI

As far as the IFI is concerned, the bank loan taken out to purchase an apartment in Israel is deductible from the taxable net real estate assets, thus reducing the tax base. This means that the amount of IFI due will be calculated on the basis of the net value of the apartment, i.e. the value of the apartment less the amount of the loan. Thus, the purchase of an apartment in Israel via a bank loan may have a favorable impact on the amount of IFI to be paid in France.

Potential tax benefits of borrowing

In addition to the impact on the IFI, a bank loan for the purchase of an apartment in Israel can also offer other tax advantages. For example, the interest paid on the loan can be deducted from rental income earned in Israel, thereby reducing the tax base and therefore the amount of rental income tax payable in Israel.

Furthermore, in certain situations, it may be possible to benefit from a tax credit in France for taxes paid in Israel on rental income, depending on the provisions of the Franco-Israeli tax treaty. This avoids double taxation and reduces the overall tax burden for owners of apartments in Israel subject to the IFI in France.

It is therefore essential to understand the tax implications of buying an apartment in Israel with a bank loan, and to consult a tax expert to optimize your tax situation and meet your tax obligations in France and Israel.

IFI for expatriates and new immigrants to Israel

The tax situation of expatriates and new immigrants to Israel, particularly those with Olim Hadashim status, may have implications for the Impôt sur la Fortune Immobilière (IFI) for owners of apartments in Israel subject to this tax in France. It is therefore essential to understand these specificities in order to optimize your tax situation.

Olim Hadashim status and tax benefits

Olim Hadashim are people who have immigrated to Israel and benefit from a special status granting them various tax advantages. These include a 10-year exemption from income tax. on income for new immigrants to Israel. This exemption allows Olim Hadashim not to be taxed in Israel on income received abroad during this 10-year period. However, it is important to note that this exemption does not apply to the IFI, which is a tax specific to France.

Exit Tax for Olim Hadashim

10-year foreign income tax exemption for new immigrants

New immigrants to Israel benefiting from this 10-year exemption from foreign income tax are therefore subject to specific tax rules. This exemption exempts them from paying income tax in Israel on their foreign income, but does not exempt them from paying IFI in France if they are also French tax residents. It is therefore important for these people to understand the implications of this exemption for their tax situation, and to comply with their IFI obligations.

It is therefore essential to consult a tax expert for Olim Hadashim who were subject to the IF before making the ALYA. Otherwise, they may find themselves in trouble with the Israeli tax authorities.

You have to make arrangements with the French tax authorities to disconnect from the tax system - it's not automatic!

IFI implications for an apartment in Israel

Expatriates and new immigrants to Israel, especially those with Olim Hadashim status, must therefore take into account their specific tax situation when owning an apartment in Israel subject to the IFI in France. It is important to declare these properties correctly in their IFI return, and to comply with tax obligations in France and Israel. For this, we recommend consulting a tax expert, who can advise you on the best strategies to optimize your tax situation.

Conclusion

In summary, it's crucial to understand Israeli real estate taxation and the implications for the Impôt sur la Fortune Immobilière (IFI) in France. French tax residents owning an apartment in Israel need to take into account their tax residence situation in France and Israel, as well as the specific tax obligations associated with real estate ownership in Israel. The prescription, the purchase via a bank loan and the amount to be paid according to the tax rate are all important elements to consider in order to optimize your tax situation.

Faced with these challenges and international tax obligations, it's essential to consult a tax expert. Our expertise and in-depth knowledge of real estate taxation in Israel and the IFI in France will enable you to navigate these obligations with peace of mind, and benefit from personalized advice to optimize your tax situation. Do not hesitate to contact us to benefit from our support and make the most of your apartment in Israel.

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Boruch Levenson - CPA

A native English speaker qualified in both Israel and the UK, Boruch cares for the English speaking clients.

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Our consultants in Jerusalem

English speaking accountants in Israel
Address: Kanfei Nesharim 68. Merkaz Oranim
Phone number: 02 631 9000
Fax: 02 631 9005
Email: office@cpa-dray.com