Is there a wealth tax and, if so, which factors bring an individual within the scope of that tax, at what rate or rates is it charged, and when must tax returns be submitted and tax paid?
Private Client (2nd edition)
There is no wealth tax in Israel.
There is no wealth tax in Ireland.
However, Irish-domiciled individuals who, in any given year, earn worldwide income in excess of €1m, own Irish property valued at greater than €5m, and have a liability to Irish income tax of less than €200,000, will be subject to a levy of €200,000 in respect of that tax year. This is referred to as the ‘domicile levy’.
The domicile levy is due on / before 31 October in the year after it arises. Individuals are permitted to offset the amount of income tax payable in the same year against the domicile levy.
There is no general wealth tax. However, real estate is subject to an annual tax which is calculated on its deemed income (‘cadastral income’), and as from 10 March 2018 a new tax of 0,15% is levied on the total value of in-scope securities that are held by (i) Belgian resident individuals on their Belgian or non-Belgian securities accounts, and (ii) non-resident individuals on their Belgian securities accounts, if the average annual value of those securities equals or exceeds EUR 500.000.
The US does not impose a federal wealth tax.
There are no wealth taxes in Cyprus.
Austria does not levy a wealth tax.
Bulgaria does not have a wealth tax.
Argentine domiciled individuals are subject to a tax that is assessed on all of the individual’s property known as Personal Asset Tax (Impuesto sobre los Bienes Personales) located in Argentina and abroad as of 31 December each year.
Argentine Congress has recently passed a Law (December 5th 2018) which intends to modify Personal Asset Tax Law. At the time of this contribution, the Executive Branch has not promulgated the mentioned law.
However it can be said that the mentioned law raises the minimum taxable base from ARS1,050,000 to ARS 2,000,000 and introduces again a progressive scale (no longer a fixed tax rate), as follows:
- Between ARS 0 and ARS 3,000,000, the applicable rate will be 0,25% on the amount exceeding ARS 3,000,000.
- Between ARS 3,000,000 and ARS 18,000,000, will pay a flat rate of ARS 7.500 and a rate of 0,50% the amount exceeding ARS 3,000,000.
- As from ARS 18,000,000, will pay a flat amount of ARS 82.500 and a tax rate of 0,75% on the amount exceeding ARS 18,000,000.
In the case of the real property in which the taxpayer lives (Casa Habitación) or in which the deceased used to live in the case of undivided estates, will not be taxable when their value is equal or less than ARS 18,000,000.
The taxable base is the value of such assets and except for few exceptions, debts are not deductible.
This tax is also applicable to individuals domiciled abroad. To ensure that the tax is collected, the law provides a method of substitution that imposes on the local resident that has the administration of the asset owned by a foreigner, the obligation to file the tax return and pay the tax (Substitute Taxpayer Regime). In this case, it is assessed on property located in Argentina applying a fixed tax rate of 0,25%.
Expatriates residing in Argentina on work assignments for a period not exceeding five years are considered to be domiciled in Argentina, but they are taxed only on personal assets located in Argentina.
Personal Asset Tax is an annual tax. The tax return must be filed in mid-June of the year following the given Fiscal Period. In the case of individuals domiciled abroad the tax return should be filed by the Substitute Taxpayer.
In must be said, that although the shares and other equity participations in local companies must be disclosed in the relevant tax return by the resident individual or the Substitute Taxpayer, the taxable base conformed by the value of these assets would not be computed, due to the fact that the local company is responsible to file a special tax return (Declaración Jurada de Acciones y Participaciones) and pay the tax at the applicable rate of 0.25% on the net worth value of the company.
Monaco levies no wealth tax.
The Italian legislation does not provide for a comprehensive wealth tax. Wealth taxes apply to certain types of assets. They are levied upon residents (see 1) on worldwide financial products (a sub-category of financial assets) and real estate, while non-residents are subject to wealth taxes only on Italian-situs financial products and real estate. The rate is 0.2% for financial products and 0.76% for real estate. Wealth taxes are generally assessed through the annual income tax return and the timing of the payments generally coincides with the timing of the payment of income taxes (see 2).
There is no wealth tax in Bermuda.
There is no wealth tax in the UK.
As of January 1st, 2019, a net worth tax for FYs 2019 to 2021 is triggered on the possession of a net worth as of January 1st, 2019 equal to or in excess of COP $5.000.000.000 (Approx. USD 1.539.000).
This tax applies to individuals and foreign entities. In the case of resident individuals, this tax is based on worldwide assets and in the case of non-residents individuals and non-resident entities it is based on Colombian situs assets other than shares, accounts receivables and/or portfolio investments, for example real estate, aircrafts, yachts, boats, speedboats, art or oil and mining titles.
The net worth tax rate is 1%.
There is no wealth tax in the Cayman Islands.
There is currently no wealth tax in Germany.
Singapore does not impose any wealth tax.
Portugal does not levy a wealth tax.
A wealth tax was applicable in France up until January 1st 2017 (see § 4.1.) a new one only based on real estate properties is applicable since January 1st 2018 (see § 4.2.).
4.1. ISF (“impôt de solidarité sur la fortune”)
Up until January 1st 2017, a wealth tax applies in France (so called “impôt de solidarité sur la fortune” “ISF”) based on worldwide assets owned by French resident individuals and on French assets owned by non-resident taxpayers. Some exemptions applied on pieces of arts and business assets.
Non-resident individuals were also exempted from wealth tax on their French financial assets. Real estate properties located in France owned directly, through French or foreign companies or through companies qualifying as “société à prépondérance immobilière” (real estate holding companies) or companies owned for more than 50% by the same family members were also subject to wealth tax as qualifying as French assets.
In a nutshell are qualified as “société à preponderance immobilière” companies owning (directly or indirectly) French real estate properties having a market value exceeding those of other French assets they own. The concept of “société à prépondérance immobilière” for ISF purposes is defined in the same way than for gift and inheritance taxes (see § 5). This definition is however different from those applicable for capital gains tax purposes (see § 2) and from those applying for transfer duties purposes (see § 8.1.)
Finally, settlors of trusts, as well as, after their death, beneficiaries who are appointed as deemed settlors by the deed of trust and/or by the trustees were also subject to wealth tax as if they were the owners of trust’s assets (see § 20).
Wealth tax (ISF) has been repealed by the Finance law for 2018 and replaced by a new wealth tax only based on real estate properties owned directly or indirectly by individuals. This new tax is called “Impôt sur la Fortune Immobilière” (“IFI”).
Certain rules applying to ISF also apply to IFI such as the freehold under which the tax is due and the progressive scale rates (see §4.2).
On the other hand, other rules are different. This is the case of the concept of “société à prépondérance immobilière” (real estate company) which does not apply for IFI purposes. Since real estate properties owned by a company are subject to IFI whatever the companies’ assets composition is. New rules also limit the deduction from IFI taxable basis of the debts incurred by French resident and non-resident taxpayers.
The statute of limitation period for ISF as well as IFI is as a general rule, six years, but can be limited to three years under certain circumstances.
4.2. IFI (“impôt sur la fortune immobilière”)
Since January 1st 2018, French resident individuals as defined by article 4B of the French tax code (see § 1.1.) are subject to IFI on real estate properties regardless their place of location (France or abroad) they own directly or through entities, companies or trusts.
As from the same date, non-resident individuals are subject to IFI on real estate properties located in France they own directly or through entities, companies or trusts.
French resident taxpayers who were tax-resident of another country during the five preceding years benefit from a five-year exemption of IFI in respect of their real estate properties located abroad.
IFI is payable by individuals whose real estate properties’ market value after deduction of qualifying debts exceeds a certain limit on January 1st each year (1.300.000 € for 2018).
As a general rule, all real estate properties owned directly or indirectly, through trusts, entities or companies (French or foreign) are subject to IFI.
Only real estate properties used for the business activity of their owners can benefit from an exemption, under certain conditions. Rental activities of buildings do not qualify as a business activity.
As a general rule, the market value of shares corresponding to the value of real estate properties owned by the companies are subject to IFI.
The shares of companies running a business activity or representing less than 10 % of the share capital or voting rights benefit from an exemption for IFI purposes even if they own real estate properties.
Only debts incurred for the acquisition, refurbishment, repairs or maintenance of the real estate properties are deductible, under certain limited conditions.
Bullet loans are not fully deductible. Only a fraction of the principal corresponding to the total amount remaining due divided by the duration of the loan can be taken into consideration on January 1st of each year.
Loans granted from affiliated companies held by the ultimate owner of the real properties are not deductible.
Loans borrowed by family members can only be taken into consideration if their terms and conditions correspond to arm’s length transactions.
Finally, for real estate properties having a market value exceeding five million euros the deduction of the debts exceeding 60% of their market value is limited to 50%.
For 2018 individuals liable to IFI will be subject to the following progressive scale rates:
- Up to 800,000 € 0%
- From 800,000 € to 1,300,000 € 0.50%
- From 1,300,000 € to 2,570,000 € 0.70%
- From 2,570,000 € to 5,000,000 € 1.00%
- From 5,000,000 € to 10,000,000 € 1.25%
- More than 10,000,000 € 1.50%
Besides, the total amount of income tax, IFI and some specific local taxes cannot exceed 75% of the taxpayer’s reference tax income (“revenu fiscal de référence”). However, as a general rule, this limit does not apply to non-residents. We consider that this measure is discriminatory.
Market value of assets subject to IFI and corresponding deductible debts should be reported in the annual income tax returns of resident and non-resident tax payers. They should be filed before 31 May of each year. The corresponding tax should be paid upon receipt of the tax notice established by the French tax authorities.
Resident individuals are taxed on their worldwide wealth. However wealth from foreign businesses and foreign immovable property is tax exempt.
Non-residents are taxed on wealth of Liechtenstein immovable property.
Wealth tax – total assets (movable and immovable) less debts at the beginning of the tax year is the base of wealth tax. However, foreign immovable assets and assets of foreign permanent establishments (less pro-rata debts) are to be taken into account only with regard to the tax rate. The assets are included in the taxable income with a nominal yield of 4% and subject to income tax.
Maximum rates for residents are between 0.8% and 0.9% depending on the commune in which they live.
Mexican law does not distinguish income tax and wealth tax, as wealth is contemplated as an ordinary income for tax purposes.