IFI: why an expert valuation of your property assets is crucial

The temptation to undervalue one’s properties in order to reduce the IFI tax base is a common but risky trap. The tax authorities can carry out in-depth audits and, if they consider that the declared values are below market reality, a reassessment will be applied. This reassessment includes not only the amount of tax due, but also penalties of up to 40% in the event of bad faith. The tax authorities have access to a wealth of information on the property market, which allows them to check quickly whether the declared value is realistic.

A property valuer registered with a Court of Appeal or a member of bodies such as the RICS is able to provide an accurate valuation in line with market practice and tax requirements. By calling on a valuer, you considerably reduce the risk of reassessment while optimising the net taxable value of your assets.

The other frequent mistake is to overvalue one’s properties. This can happen when the taxpayer, out of excessive caution, declares a higher value to avoid any problem with the tax authorities. Such an overvaluation leads directly to overtaxation, needlessly increasing your tax bill.

By entrusting the valuation of your properties to a qualified valuer, you ensure that the declared value genuinely reflects market conditions. A valuer will also be able to identify deductible liabilities (outstanding loans, works) and the allowances available, which may reduce the tax base.

Certain categories of property require specific valuation methods:

• Properties under split ownership (bare ownership and usufruct) require particular expertise to determine the respective values of each part.
• Rental properties: the valuation must take account of current and future rents, as well as potential vacancy.
• Mixed-use properties (retail and residential) or complex assets such as office buildings require a specialist approach to avoid over- or undervaluation.

Calling on a property valuer enables you to obtain an objective and substantiated valuation, using recognised methods consistent with market practice, whose detailed report can be used in the event of a tax audit; to optimise the value of your properties while complying with the law, by correctly identifying allowances and deductible liabilities; and to benefit from strategic advice on wealth management, such as split ownership (usufruct and bare ownership).

The correct valuation of your property assets for IFI purposes is not something to be taken lightly. An undervaluation can lead to heavy penalties, while an overvaluation makes you pay too much tax. To avoid these pitfalls, it is essential to call on a property valuer: a reasoned and signed valuation consistent with market practice secures your tax position.