Investing in bare ownership is a popular solution for those wishing to diversify their assets while enjoying significant tax benefits, particularly in terms of reducing their IFI (Impôt sur la Fortune Immobilière). Bare ownership offers the opportunity to acquire a property at a reduced cost, while being exempt from the IFI (Impôt sur la Fortune Immobilière), because only full ownership is taken into account for this tax.
Investing in bare ownership and reducing your IFI: an advantageous tax strategy
Bare ownership is an effective legal strategy for optimising your property wealth tax (Impôt sur la Fortune Immobilière - IFI). By investing in bare ownership, taxpayers can reduce their tax base and significantly lighten their IFI tax burden.
Understanding the IFI: how it works and how the tax is calculated
The IFI, the successor to the ISF, is a tax on property assets that applies to individuals whose net property assets exceed €1,300,000 on 1 January of the tax year. There are several stages to the IFI tax return:
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Identify all the property assets in the estate.
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Exclude movable assets and financial investments (life insurance, securities) not covered by the IFI.
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Assess the taxable assets according to their market value (estimated sale price on the market).
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Deduct the debts attached to the properties concerned.
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Apply the progressive scale to determine the final amount of the IFI.
Taxable value in the event of dismemberment
In the case of joint ownership, the assessment of the taxable value depends on whether you are the usufructuary or the bare owner. In general, the usufructuary must declare the full-ownership value for the IFI, regardless of the share held by the bare owner.
Special case: death of the bare owner
If the bare owner dies before the end of the usufruct period, the bare ownership will be included in his or her estate. The heirs will then have to pay inheritance tax, as the bare ownership will become part of their estate.
Exemptions and specific cases of taxation of the IFI in dismemberment
Certain cases provided for in the General Tax Code (CGI), in particular article 968, allow the IFI to be split between the beneficial owner and the bare owner. These exceptions apply mainly to dismemberments in favour of the surviving spouse or ascendants. In the case of a sale in dismemberment, the beneficial owner and the bare owner may be taxed separately, provided that the dismemberment complies with certain legal criteria defined by article 751 of the CGI.
SCPI in dismemberment and the IFI
Shares in split-ownership SCPIs (Sociétés Civiles de Placement Immobilier) follow similar rules: the beneficial owner is liable for IFI tax on the full value of the shares, while the bare owner is exempt.
Tax advantages for the bare owner for IFI purposes
If you invest in bare ownership, you will be exempt from the IFI for as long as the usufruct remains in place. The bare ownership of the property is excluded from the IFI tax base, except in the specific cases of shared taxation mentioned in article 669 of the CGI. At the end of the usufruct period, the bare owner becomes the full owner, and will then have to include the full value of the property in his or her IFI tax base.
Conclusion: an effective lever for reducing the IFI base
Bare ownership is an ideal solution for reducing the IFI tax base while encouraging the transfer of assets. By investing in bare ownership, taxpayers can optimise their tax position and effectively plan the distribution of their assets. However, this strategy requires careful planning and sound advice to maximise the benefits while avoiding the risks of tax requalification.
