Dubai property and the French wealth tax (IFI): the worldwide-wealth trap

The principle: worldwide IFI for French residents

IFI applies to the real-estate assets of individuals whose net taxable value exceeds €1,300,000 on 1 January of the tax year. For a person tax-domiciled in France within the meaning of article 4 B of the CGI, the base comprises all real-estate assets and rights, whether situated in France or abroad. An apartment, a villa or a unit held in Dubai therefore enters the base on the same footing as a French asset. By exception, individuals who become French tax residents after five years abroad are taxable only on French-situs real estate until 31 December of the fifth year following their return (CGI, art. 964, 1°, para. 2): the Dubai property temporarily escapes the IFI — a decisive point for returning impatriates.

The €1.3m threshold, but a calculation from €800,000

IFI is due only if net taxable wealth exceeds €1,300,000. But once that threshold is crossed, the scale applies from €800,000 (first band at 0%, then 0.50% from €800,000 to €1,300,000, and so on). A real-estate estate of €1.4m including a Dubai property thus becomes taxable, whereas it might have stayed below the threshold without the Emirati acquisition.

The France-UAE treaty does not exempt your Dubai property

It is sometimes believed that the France–United Arab Emirates tax treaty of 19 July 1989, which also covers wealth tax, protects Dubai real estate. That is not the case for a French resident. The treaty's wealth provision (article 16 A) organises an exemption for the benefit of UAE residents in respect of their real-estate wealth situated in France, subject to conditions — that is, the reverse situation (see the guidance BOI-INT-CVB-ARE). It provides no exemption, for a French resident, of their real estate situated in the Emirates. Domestic law therefore applies in full.

Taxable base: what is deductible

The value used is the market value on 1 January. Debts relating to the asset are notably deductible, subject to conditions — in particular the loan that financed the acquisition (outstanding principal). A Dubai purchase financed by a matching loan may thus reduce the IFI base, but the anti-abuse rules capping debts (notably for interest-only loans and family loans) must be checked case by case.

Filing

IFI is declared together with income tax, on the dedicated annex (form no. 2042-IFI), setting out the detail and value of assets, including those situated abroad. Omitting a foreign asset exposes you to the ordinary reassessments and penalties.

The scale and the décote applied to a Dubai property

The IFI scale is set by article 977 of the CGI. It is a progressive scale by bands: the tax is due only if net taxable real-estate wealth exceeds €1,300,000, but, once that threshold is crossed, the calculation runs from €800,000.

To soften the threshold effect, a décote (tapering rebate) applies where net taxable wealth is at least €1,300,000 and below €1,400,000: it equals €17,500 − 1.25% × P, P being the net taxable value of the estate (CGI, art. 977, 2).

Three worked examples

Common assumption: the household owns an apartment in Dubai with a market value of €476,000 on 1 January (AED 2,000,000, July 2026), included in the net taxable real-estate wealth shown. For simplicity, no deductible debt is taken into account.

First case — €1,350,000. The tax before the rebate comes to €2,850: €0 up to €800,000, then €500,000 × 0.50% = €2,500, then €50,000 × 0.70% = €350. The rebate amounts to €17,500 − (1.25% × €1,350,000) = €625, leaving IFI due of €2,225. Above all, without the Dubai property the estate would stand at only €874,000, below the €1,300,000 threshold: the Emirati acquisition alone triggers the tax.

Second case — €2,500,000. The tax comes to €10,900 (€2,500 on the second band, then €1,200,000 × 0.70% = €8,400). Without the Dubai property, the €2,024,000 estate would have generated IFI of €7,568: the property adds €3,332 a year to the tax, i.e. 0.70% of its value.

Third case — €6,000,000. The tax comes to €48,190 (€2,500 + €8,890 + €24,300 + €1,000,000 × 1.25% = €12,500). The Dubai property, taxed here at the 1.25% marginal rate, represents an annual extra cost of €5,950. At this level of wealth, the questions of financing and ownership structure arise before signing, not after.

Reducing the base legally

Several levers, all provided for by law, help contain the impact of a Dubai property on IFI. They must be pulled at the right time — most often before the purchase or before the return to France.

Deductible debts (CGI, art. 974)

Debts existing on 1 January, actually borne by the taxpayer and relating to a taxable asset are deductible — first among them the acquisition loan, for its outstanding principal. Financing granted by an Emirati bank is deductible in the same way as a French loan, provided its existence, purpose and amount can be substantiated: the loan agreement, the amortisation schedule and statements evidencing repayments must be producible to the tax authority, translated where necessary. Three limits deserve attention. An interest-only (in fine) loan is deductible only up to the theoretical annuities remaining, as if it amortised on a straight-line basis. A loan granted by a close relation is disregarded unless the normal character of its terms and the reality of the repayments are demonstrated. Finally, where the value of taxable assets exceeds €5,000,000 and debts exceed 60% of that value, the excess is deductible only up to 50%, unless it is shown that the borrowing does not pursue a mainly tax-driven aim (CGI, art. 974, IV).

Split of ownership: caution (CGI, art. 968)

Splitting ownership does not, in principle, deliver the saving often expected of it: the usufructuary is taxable on the full-ownership value of the asset, with no allowance, while the bare owner has nothing to declare. Reserving the usufruct of a Dubai property while giving away the bare ownership therefore does not reduce the donor's IFI. By exception, in a limited list of cases — notably the surviving spouse's statutory usufruct or the sale of the bare ownership to a non-family buyer with reservation of usufruct — the tax is apportioned between usufructuary and bare owner in proportion to the value of their rights. Conversely, acquiring only the bare ownership of a Dubai property in principle leaves the buyer outside the base for the whole duration of the split. The effect of a split of ownership on the IFI depends on the exact legal nature of the rights registered in Dubai and on their characterisation under article 968 of the CGI; it cannot be presumed from the contractual label alone.

The incoming resident's timetable (CGI, art. 964, 1°, para. 2)

For anyone preparing a return to France, timing matters as much as structure. The new resident who was not tax-domiciled in France during the five calendar years preceding the return is taxable only on French-situs assets until 31 December of the fifth year following that of the return. This temporary exemption covers assets situated outside France whatever their date of acquisition: a Dubai property bought after the return, during the period, also remains outside the base until it ends. Buying before the return may nevertheless retain evidentiary value (financing and ownership documented from the Emirati period) — and those five years can be used to organise the financing, the ownership structure or a possible disposal before the asset enters the taxable estate.

The cap (CGI, art. 979)

A final safeguard: the total formed by the IFI and the previous year's income tax may not exceed 75% of that year's income; the excess is deducted from the IFI. This mechanism, reserved for taxpayers domiciled in France — the tax authority extending it to non-residents whose income is entirely or almost entirely French-source (so-called "Schumacker" non-residents, BOI-INT-DG-20-40) — can prove useful in the year of the return from Dubai, when income taxable in France is still low relative to the estate.

If you are not a French tax resident

The IFI concerns French tax residents on their worldwide real estate and, for non-residents, only real estate situated in France. A UK, US or other non-French resident who owns an apartment in Dubai is therefore not liable to French IFI on that property — the question simply does not arise, whatever its value.

Whether any other wealth tax applies depends entirely on the owner's State of residence: the United Kingdom and the United States levy no general net-wealth tax; Belgium has none either; Switzerland taxes wealth at cantonal and communal level, foreign real estate being in principle exempt there while counting towards the rate applicable to the rest. And one point is universal: the United Arab Emirates levy no wealth tax on anyone, resident or not. For a non-French resident, the IFI becomes relevant only upon a move to France — at which point the five-year new-resident exemption described above deserves attention before, not after, the move.

Frequently asked questions