The property tax regime implemented as of 1 January 2018, by the Finance Act for the year 2018, had already been the subject of additional clarifications by administrative doctrine (BOFIP) on June 8 2018.

However, the legislator has taken note of some legal uncertainty regarding the legal regime of the IFI. The legislator has decided to make some clarifications in the Finance Act for 2019.
These new amendments, which will be applicable from 1 January 2019, provide justifications for the legislator’s intention in the text.

The implementation of the IFI and the many changes made to the deductibility of liabilities (we refer you to our article on the deductibility of debts in the IFI, which is much more complex than under the ISF “Solidarity tax on wealth” regime) is intended to undermine certain practices that some might call dubious and others ingenious.

Article 48 of the Finance Act for 2019, No. 2018-1317, dated 28 December 2018, initially provides for the replacement of the term “property or real estate law” with the term “assets” pursuant to part II of article 973 of the General Tax Code, which extends the scope of this article and leads to a de facto reduction of the possibility to deduct debts when valuing units or shares.
The same applies for section II of article 974 of the General Tax Code, which is also amended, including the terms “property or real estate law” which is also replaced by the term “assets”.

The regime for the deductibility of debts is further limited.

Article 48 of the Finance Act for 2019 inserted a section III in article 973 of the General Tax Code, this section III provides that: – “For the valuation of units or shares mentioned in section 2 of Article 965, debts corresponding to loans mentioned in section II of article 974, whether contracted, directly or indirectly, by a company or an organisation for the purchase of a taxable asset are taken into account each year when calculating the deductible amount defined in this section II.

For your information, section II of article 974 of the General Tax Code relates to loans taken out for the repayment of capital (term loans are expressly targeted here) these substantial amendments provide partial responses, with the legal uncertainty surrounding the deductibility of term loans, which please be reminded, must be depreciated in some cases.

If for certain persons the law appeared clear by limiting the deductibility of term loans taken out by natural person taxpayers and not those indirectly contracted through a legal entity, at no time did the BOFIP BOI-PAT-IFI-20-40-20-20180608 draw a distinction between a natural person and a legal person, whereas the latter has set out the criteria and conditions for the deductibility of term loans, as a result of which, the information provided by the legislator is therefore welcome, however case law examples would be equally appreciated.


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