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Regulated by the General Tax Code – Article 199 novovicies, the tax system was first introduced with the 2015 Finance Law by the Housing Minister Ms. Sylvia Pinel.
According to the latest update of the Pinel law dating from April 2019, the dwellings concerned are those who contribute to the New Build Construction or to the off-Plan Purchase for the limited date of December 31st , 2021.
It allows you to reduce your taxes benefiting the advantages of a rental property.
Investing in new homes allows you to take advantage of a tax reduction for French residents. This device is set up by the Pinel law which grants a tax exemption following a rental property investment in a new home construction.
And since 2019, the finance law project frameworks the Pinel Law for investment in the old construction and transaction. A decision voted by the deputies who sit in the National Assembly.
The Pinel device
The old devices (Scellier and Duflot) only offered a tax reduction of 13% or 18%. The Pinel scheme goes further and proposes a reduction that can amount up to 21% of the amount of the investment. A tax reduction that can reach the sum of 63.000 € with the Pinel law.
The advantages of the Pinel law are more important than those of its predecessor. Indeed, the device Pinel offers the possibility of being able to rent our own property to our family, to our ancestors or to our descendants.
Ex: For an investment of 150.000 €, you can reduce your taxes by:
- 18.000 €, or 3.000 € per year if you rent your new property for 6 years
- 27.000 €, or 3.000 € a year if you rent your new property for 9 years
- 31.500 €, or 3.000 € per year for 9 years, then € 1.500 per year for 3 years if you rent your new property for 12 years
According to the principle of retroactivity, since 1st of September 2014, all property acquired under Pinel law is eligible for tax exemption. Except in the context of the beneficial bottom-up measure, which is only applicable since 1st of January 2015.
The conditions
Different eligibility conditions are mandatory by the Pinel system. In relation to housing, renting and investment, it is necessary to respect these conditions in order to qualify for the tax benefits.
The Accomodation
The accommodation, to be eligible for the Pinel scheme, must comply with the following conditions:
- be new or renovated (see previous Law Pinel)
- be acquired in the Newbuild construction
- benefit from the BBC 2005 label or respect the thermal regulations (RT 2012)
- be built within 30 months of the Site Opening Declaration
- be rented within 12 months after handing over the keys
The Rent
The rent, to be eligible for the Pinel scheme, must comply with the following conditions:
- Pinel rental of the property on the commitment period: 6, 9 or 12 years (min 6 years)
- rental as a principal residence
- unfurnished rental
- definition of rent due to the rent ceilings established according to the Pinel zones
The Investment
The financial conditions specific to the Pinel scheme for investing in new properties are as follows:
- the investment must not exceed 300.000 €
- the investment must be 5.500 € per m² maximum
- the investments are limited to 2 per year within the limit of 300.000 €
The French taxpayer who is wishing to invest can benefit from advantageous conditions announced by the law.
The goal of the government is to develop the financing of individuals in the real estate industry in order to revive and growth the sector; which, in the long run, increases the supply of rental housing in the general market of real estate.
You can HERE download the practical guide on the law Pinel established by some tax experts.
N.B:
- The tax reduction is included in the ceiling of tax loopholes limited to € 10.000 per year & per household.
- The tax reduction is, therefore, proportional to the term of the commitment: 12, 18 or 21%.
- The tax reduction can not be carried forward from one year to the next.