French National Assembly Approves Transforming Wealth Tax into 'Impôt sur la Fortune Improductive' in 2026 Budget

The French National Assembly has recently adopted a significant amendment to the 2026 Finance Bill that transforms the Impôt sur la fortune immobilière (IFI), a tax on real estate wealth, into a broader "impôt sur la fortune improductive". This development was led by Deputy Jean-Paul Mattei and marks a fundamental shift in France's wealth tax structure.

The key change involves expanding the tax base to include not only unproductive real estate assets but also rental properties, while protecting the primary residence from taxation. Notably, the amendment eliminates the progressive scale of the IFI but retains the tax exemption threshold at 1.3 million euros. This aims to address economic inconsistencies by taxing non-productive assets irrespective of their financial investment nature.

This legislative move revives debates reminiscent of the former wealth tax (ISF), which was abolished in 2018. Critics, including politicians like Bruno Retailleau, have condemned the change as a "fiscal madness," reflecting divergent views on taxing unproductive wealth. Proponents argue that the prior IFI's exclusion of financial assets and focus solely on real estate wealth was economically incoherent.

The amendment's broader intention is to encourage the efficient use of wealth assets and close perceived tax loopholes by broadening the tax net. These changes are part of the wider 2026 budget reforms, which involve various fiscal policy adjustments amid social and economic challenges facing France.

While the IFI's transformation signifies a major shift in wealth taxation policy, the broader 2026 budget has experienced mixed reactions, particularly within social security reforms and retirement policies. Nonetheless, the amendment on the wealth tax system stands as a critical piece of the financial legislation landscape as France moves forward in its budget planning for 2026.