In France, there are a number of tax breaks for property to encourage taxpayers to invest in property, a sector in which investment is essential. Every year, these tax carrots are extended, modified or even cancelled. Read on to find out about the changes made by the 2016 Finance Act.
The Pinel law to remain unchanged until the end of 2016
One of the most popular tax niches on the market, the Pinel law is a tax incentive scheme for investment in rental property. Taxpayers invest in a new property and agree to let it for at least 6 years, earning a tax reduction of around 2% of the property's value each year. The scheme can be extended for a maximum of 12 years: the tax advantage is maintained at 2% of the value of the property until the 9th year, then 1% until the 12th year. Please note that this scheme is only valid until 31 December 2016. But thanks to its impact on the property recovery in 2015, there is a good chance that it will be extended...
The Girardin real estate law has been extended
This real estate tax niche is special in that it is a purely tax-based investment. In short, you buy your tax reduction by investing in the construction of social housing in the French Overseas Territories. If you invest in a Girardin property scheme in 2016, you will benefit from a tax reduction of 10-15% of your initial investment from 2017. The Girardin law also remains a very attractive tax niche, especially as it has been extended until the end of 2025 for investment in the COMs and New Caledonia.
The Censi-Bouvard scheme
This tax exemption scheme is designed to promote investment in rental properties for tourists, students, pensioners and the elderly. The tax advantage is twofold: you reduce your income tax by 11% of the property's value excluding tax, and you can reclaim the VAT on the property (20% of the purchase price excluding tax). The scheme is currently valid until 31 December 2016, but property developers are pushing hard for it to be maintained. Stay tuned...
The Malraux law
The oldest of the property tax niches (dating from 1962), the Malraux Act aims to preserve France's architectural heritage. It applies to investments in the restoration of old buildings located in 3 specific zones and intended for rental for at least 9 years:
- Tax advantage equivalent to 30% of the amount invested in the restoration of an old building located in a protected area.
- The same tax advantage applies to restoration work on a building in a run-down old quarter (new feature introduced by the 2016 Finance Act).
- Tax reduction of around 22% on sums invested in housing in an Architectural, Urban or Landscape Heritage Protection Zone.
In short, there is no shortage of ways to reduce your tax bill while investing in property. You just need to find the one that suits your income and needs best.
