The ISF is the solidarity tax on wealth. Unlike other taxes, the ISF does not tax income but wealth. Only fiscal households with assets above €1,310,000 are liable to this tax.
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The “CAPI” plan (contrat de Capitalisation)
The operation of the “CAPI” plan is similar in many respects to that of the “assurance-vie”, particularly as regards to taxation. The two main differences are that the “CAPI” plan:
– Designates neither insured or beneficiary
– Does not enjoy the tax benefits specific to the assurance-vie as part of a succession
Moreover, the “capi” plan can be very useful as part of the ISF, because it is only taxable on its nominal value (capital gains made are not taken into account).
Example: You place €100,000 on a “capi” plan. After a few years, its commuted value is €150,000. This plan will remain taxable to the ISF for a value of €100,000.
The dismemberment of ownership
Full ownership of a property can be divided into two distinct entities: the bare ownership and the usufruct.
Bare ownership is owning a property and the usufruct is the right to enjoy the property.
We talk about dismemberment when the two entities are separate. They can then be bought and sold separately.
The value of a property enters the taxable assets of the individual who has the usufruct.
In other words, the bare owner may, through the dismemberment, take a sum out of the ISF tax base and reduce its tax liability.
The dismemberment may be temporary or permanent. This is particularly interesting in terms of tax efficiency while preparing a succession.
Investment in wealth tax FIP or FCPI
The FIP (local investment funds) are funds that invest in “PMEs” located in a region or in neighboring regions to the latter. FCPIs (Mutual Funds in Innovation) are funds that invest in innovative companies.
To enable a reduction of ISF, the FIP and FCPI securities must be kept for at least 5 years.
Under the FIP and FCPI, the share of investment excluded from the taxable wealth under ISF is 50% from the fund invested in eligible businesses within the limit of €18,000.
Example: a taxpayer invests €10,000 in a wealth tax FIP, which has itself 80% of eligible FIP securities. 10,000 x 80% x 50% = €4,000 reduction of “ISF”.
Woods and forests
Investing in wood, forest or in units of forestry groups also enables to reduce the ISF liability.
This type of investment allows a double tax exemption of the ISF:
◦ First, the taxpayer receives an immediate wealth tax reduction on 50% of the invested amount to the limit of €90,000.
◦ In addition, it will only account for 25% of the actual value of the units of the group, in the wealth taxable base.
The tax allowance of 75% on the value of the shares also plays in matters of succession and donation.
Lowering your tax base
Some assets do not fall within the ISF tax base. Investing in these can be useful, because by reducing the tax base the amount of tax will naturally decrease.
The assets totally excluded from this tax base are art objects, collectibles, antique objects more than 100 years old, professional property, property assets held under the status of professional furnished landlord (LMP), the rights of literary property, rights of artistic or industrial property, “tontine” plans (premiums paid before 70 years of age) and PERCO, PERP and Madelin plans.
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