Article 964 of the French General Tax Code is an essential pillar of the control mechanism for theImpôt sur la Fortune Immobilière(IFI), which succeeded theImpôt sur la FortuneImmobilière(wealth tax) in 2018. This text defines the specific reporting obligations incumbent on IFI taxpayers, and specifies the penalties applicable in the event of failure to comply. As adirect tax on real estate assets, the IFI requires particular attention in its application. Understanding this provision will enable you to anticipate your tax obligations and avoid potentially heavy penalties.

What is article 964 of the CGI?

Article 964 of the French General Tax Code sets out the penalties and sanctions applicable to failures todeclare IFI. Contrary to popular belief, this article does not deal with the tax declaration obligations themselves, but establishes the repressive framework in the event of a tax reassessment relating to the Impôt sur la Fortune Immobilière.

Article 964 is a coordinating text that refers to the general provisions of the General Tax Code concerning tax penalties. In particular, it makes articles 1728 (increase for failure to declare), 1729 (increase for insufficient declaration) and 1758 A (late payment interest) of the CGI applicable to the IFI. The rate of late payment interest, set by article 1727 of the CGI, is 0.20% per month.

Declaratory obligations are defined in article 982 of the CGI. Article 964 thus fulfils an essential function by establishing the link between the specific IFI system and the general system of tax penalties, guaranteeing consistency in the treatment of failure to declare.

Reporting obligations under article 964

Contents of the IFI declaration

You must declare all your taxable real estate assets on the dedicated form. This obligation covers built and unbuilt real estate, shares in real estate companies, and real property rights.

The declaration requires a precise valuation of each asset at its market value. You must also mention any deductible liabilities directly related to the assets declared. The calculation of the IFI is based on this exhaustive declaration.

Subscription terms and conditions

The IFI tax return must be filed according to the same schedule as your income tax return. For online declarations, the deadline varies according to your département of residence, generally between the end of May and the beginning of June.

Taxpayers living abroad have a specific deadline, generally the end of June. Failure to meet these deadlines constitutes a breach of the provisions of article 964.

Contents of the IFI declaration

Article 964 of the CGI penalizes non-compliance with the reporting obligations defined in article 982 of the CGI. These obligations require taxpayers whose taxable net real estate assets exceed 1.3 million euros to declare all their real estate assets: built and unbuilt property, shares in real estate companies, real property rights, and related deductible liabilities. Each asset must be valued at its market value, the basis on which the IFI is calculated. Any insufficiency, omission or inaccuracy in this declaration exposes the taxpayer to the penalties provided for in article 964.

Subscription terms and conditions

The IFI tax return follows the same timetable as the income tax return, in accordance with the provisions of article 885 W of the CGI. Failure to comply with these deadlines constitutes a breach of the provisions of article 964 of the French tax code, and automatically triggers the application of the surcharges provided for failure to file tax returns on time.

Penalties for non-compliance

Penalties for failure to declare

Failure to file an IFI tax return will result in a surcharge of 10% on the tax due. This penalty is automatically applied as soon as the tax authorities notice the omission.

In the event of formal notice remaining unanswered for 30 days, the surcharge rises to 40%. If the administration establishes that the failure to declare is the result of a deliberate maneuver, the surcharge rises to 80% of the duties evaded.

Penalties for inaccurate or incomplete declarations

Any shortcomings, inaccuracies or omissions in your IFI tax return are penalized by a 40% increase in additional tax. This penalty applies in particular when you undervalue your real estate or omit certain assets.

If the tax authorities qualify the breach as fraudulent maneuvering, the increase rises to 80%. This is generally the case when assets are intentionally concealed or artificial arrangements are made to reduce the tax base.

Late payment interest, calculated at a rate of 0.20% per month, is systematically added to surcharges. This interest runs from the payment deadline to the date of actual payment.

Penalties for failure to declare

Failure to file an IFI tax return automatically triggers a 10% surcharge on the tax due, in accordance with article 1728 of the French General Tax Code (CGI). This penalty applies as soon as the tax authorities establish that the taxpayer has failed to declare the tax, without it being necessary to establish the taxpayer’s intention. It is an objective penalty designed to punish a simple failure to comply with the obligation to declare.

If the tax authorities send you a formal notice to file your tax return, and you do not receive a response within 30 days, the surcharge increases to 40%, in application of the same article 1728. This formal notice procedure must comply with strict notification rules, and gives you sufficient time to rectify your situation. On the other hand, if the tax authorities establish that the failure to declare is the result of a deliberate fraudulent maneuver, article 1729 of the CGI applies, with a surcharge raised to 80% of the duties evaded. This qualification presupposes the demonstration of a deliberate intention to evade tax.

These surcharges are systematically added to the interest for late payment stipulated in article 1727 of the CGI, calculated at a rate of 0.20% per month. However, you do have the right to appeal against these penalties: you can contest their validity as part of the contradictory procedure, and then before the administrative courts. The tax authorities may also grant a total or partial waiver of penalties in the event of extenuating circumstances or demonstrated good faith.

Penalties for inaccurate or incomplete declarations

Any shortcomings, inaccuracies or omissions in your IFI tax return are penalized by a 40% increase in additional duties, in accordance with article 1729 of the CGI. This penalty applies automatically if the tax authorities find that the tax base has been reduced, particularly if you undervalue your real estate, omit certain assets or declare non-deductible liabilities. The burden of proof lies with the tax authorities, who must demonstrate the discrepancy between the declared value and the actual value, in accordance with the adversarial principle.

If the tax authorities deem the breach to constitute fraudulent maneuvers within the meaning of Article 1729 of the CGI, the increase in tax liability is 80% of the amount of tax evaded. Case law defines fraudulent maneuvers as intentional acts designed to mislead the tax authorities: deliberate concealment of real estate assets, use of shell companies, falsification of supporting documents, or artificial arrangements devoid of economic substance. The tax authorities must establish the taxpayer’s fraudulent intent, which places a heavier burden of proof on the taxpayer. For example, the repeated omission of the same asset over several years, or the production of false attestations of value, generally characterize this intention.

Interest on late payment, distinct from surcharges and provided for under article 1727 of the French General Tax Code, is systematically added to penalties. Calculated at the effective rate of 0.20% per month (i.e. 2.4% per annum), this interest runs from the initial payment deadline to the day of actual payment of the sums due. In the case of a 100,000 euro tax reassessment discovered three years after the due date, late-payment interest thus amounts to 7,200 euros, plus surcharges of 40% or 80%, depending on the classification used.

Audit procedure and taxpayer guarantees

IFI tax audit procedure

The tax authorities may initiate a tax audit of your IFI return within three years of the year in which it was filed. This audit may take the form of a contradictory examination of your personal tax situation, or an accounting audit for companies.

You will receive an audit notice at least 15 days before the audit begins. During the audit, the tax authorities may ask you to provide evidence of the value of your assets, the existence of deductible liabilities or the composition of your assets.

Taxpayer’s rights and remedies

You benefit from procedural guarantees throughout the audit. The administration must respect the adversarial principle and allow you to present your observations on each point of disagreement.

In the event of an adjustment, you have 30 days in which to make your observations. If the dispute persists, you can refer the matter to the departmental commission on direct taxes and sales taxes for an opinion on questions of fact.

When faced with a tax reassessment proposal, the assistance of a specialized tax lawyer is often decisive. Expert advice helps you to effectively contest unjustified tax adjustments and negotiate the applicable penalties.

IFI tax audit procedure

The tax authorities have a three-year recovery period (article L169 of the LPF) to check your IFI declaration and identify any breaches sanctioned by article 964. This period is extended to six years in the case of fraudulent maneuvers. During the audit, the tax authorities examine the value of your assets, the completeness of your declaration and the justification of deductible liabilities. By respecting the procedural guarantees available to you (adversarial principle, right of reply), you can contest the reassessments and limit the application of the penalties provided for in article 964.

Taxpayer’s rights and remedies

There are several ways in which you can contest the penalties imposed under article 964. The first lever is a contentious claim, which you can lodge up to December 31 of the second year following the year of assessment, in accordance with article R196-1 of the French Tax Procedures Code.

You can also request a settlement with the tax authorities specifically concerning penalties, without calling into question the principal amount of duties due. This approach can often result in a significant reduction in the increases initially notified.

Finally, article L247 of the LPF authorizes you to apply for an ex gratia remission of penalties, particularly if you can justify extenuating circumstances or a difficult financial situation. This request should be made directly to the departmental director of public finance. The support of a specialized tax lawyer will optimize your chances of success in contesting these penalties.

Compliance strategies and sanctions prevention

The best protection against the penalties of Article 964 is to draw up a rigorous and exhaustive IFI declaration. You need to document the precise value of each property, keeping all relevant supporting documents: valuation opinions, valuations by real estate experts, notarial deeds and any other document attesting to the declared value. This documentation is your first line of defense in the event of a tax audit, and helps demonstrate your good faith in the face of any accusations of fraudulent maneuvers.

For properties that are complex or difficult to value, it is advisable to call on the services of property professionals or real estate experts. This preventive approach not only enables you to justify your estimates to the tax authorities, but also to significantly limit the risk of reassessment and the penalties provided for under Article 964 of the French General Tax Code.

Preventing recovery risks

The best protection against the penalties of Article 964 is to draw up a rigorous and exhaustive declaration. You must precisely document the valuation of each property, retaining all relevant supporting evidence. This requirement also applies to real estate held abroad, which requires particular attention to justification and valuation.

For properties that are difficult to value, seek the advice of real estate experts or property professionals. This will enable you to justify your estimates in the event of a later challenge by the authorities.

Tax optimization in compliance with the law

Article 964 does not prohibit tax optimization, as long as it takes place within a legal framework. You can legitimately structure your assets to minimize your exposure to the IFI, in particular by taking advantage of the exemptions provided for by law.

Business assets, certain woods and forests, and shares in operating companies can benefit from total or partial tax exemptions. Identifying these opportunities requires an in-depth analysis of your asset situation.

Specialized legal support enables you to identify the relevant optimization levers while securing your compliance with Article 964 obligations. This preventive approach significantly reduces your litigation risks and optimizes your overall tax burden.

Secure your tax compliance with expert support

Article 964 of the French General Tax Code imposes strict reporting obligations, non-compliance with which carries substantial financial penalties. The growing complexity of the IFI system and the increased vigilance of the tax authorities make a rigorous approach to your declarations essential.

Faced with these challenges, the assistance of a specialized tax lawyer is a strategic investment. A qualified professional can help you prepare your tax returns, value your assets and manage any disputes that may arise. This expertise protects you against the risk of tax reassessment, while legally optimizing your tax situation.

The legal regime of article 964 of the CGI (French General Tax Code)

Article 964 of the General Tax Code provides the legal basis for penalties applicable to the IFI. This text establishes a system of cross-references to the provisions of the Livre des Procédures Fiscales (Tax Procedures Book), which set out the audit and adjustment procedures specific to this tax. The system of sanctions is closely linked to other key articles of the CGI:

• Article 1728, which defines the surcharges applicable in the event of failure to file or late filing of tax returns
• Article 1729, which provides for penalties for insufficiencies, inaccuracies or omissions
• Article 1727, which governs the calculation of late payment interest

It is important to note that this system of penalties is specifically adapted to the IFI, and differs from the general system applicable to other taxes. This specificity takes into account the particular nature of real estate assets and the valuation issues specific to this tax area.

In addition to administrative sanctions, Article 964 also provides for criminal penalties in the event of serious fraud. Taxpayers guilty of deliberate fraudulent maneuvers, such as concealing real estate assets or creating artificial structures, are liable to criminal prosecution, which can result in substantial fines and prison sentences. This repressive dimension underlines the importance attached by the legislator to compliance with IFI reporting obligations.

Cumulative penalties and caps

Under article 964 of the CGI, it is important to note that the various tax penalties are cumulative. For example, surcharges for failure to file or inaccurate filing (10%, 40% or 80%) are systematically added to late payment interest. The latter, calculated at a rate of 0.20% per month, runs from the due date until actual tax payment.

Unlike certain other tax penalties, there is no legal upper limit for these cumulative penalties. This absence of a limit can lead to particularly high amounts, especially for large estates. For example, on an IFI reassessment of €100,000 with a 40% surcharge:

Faced with these potentially considerable amounts, the only way to reduce the penalties is to apply for a “remise gracieuse”. This procedure, subject to the discretionary judgement of the tax authorities, can in some cases result in a partial or total reduction of penalties. It is generally based on arguments of good faith or proven financial difficulties, but never constitutes an acquired right for the taxpayer.