The number one hobby in France is avoiding tax! But it might come as a surprise to you that it is actually legal and encouraged by the French government. Over the past 30 years, the French government has created some laws, which gives you tax reduction in return for investing in building/creating new housing in specific areas where it is needed.
- Quick history: Just to confuse people, the name of the law and the details of it changes with every government in my view only satisfy the ego of some ministers! Yes, you guessed it, the law bares the name of the minister who created it. Loi Pinel (law Pinel). It is named after Sylvia Pinel who was housing minister! But over the past 30 years, we had Law: Borloo, Duflot, Malraux, Sellier, Robien, DeRobien, Besson, Mehaignerie just to name a few!
Fortunately, our new President has decided to keep Loi Pinel until 2021 and not change the name, only some details of it.
- How does it work: You buy a flat or house “en vente future d’achevement”-VFA meaning it has not yet been built (you buy it looking at a plan) and in return the French government gives you 2% of your investment per year as a tax reduction. So, if you buy a flat at 100 000 euro, you can claim back 2000 euro off your income tax over the next 9 years, 1% in year 9 to 12.
- Conditions: You have to rent the residence for at least 6 years. The residence has to be rented to people who use it as a main residence. You only get the tax reduction for the period that is rented. Meaning if you stop the rental after the 6 years, you also stop the tax advantages.
The residence has to be in dedicated areas, basically big towns, so not La Rochelle, Poitiers or Angoulême, but Paris, Bordeaux, Lyon, Toulouse, etc where housing is in shortage.
- Limits: You cannot buy more than 300 000 euro of housing per year. And all your tax reduction cumulated cannot go over 10 000 euro per year. Yes, they are others legal ways to reduce your tax like paying a gardener/cleaner or ecological work on your main residence so if you add them to Loi Pinel, make sure you don’t go over 10K.
- Who is it for: Well, obviously for people who pay more than 2500 of income tax per year and who want to invest in properties. If you think about it, you generate yourself some assets and in return you get tax advantages.
- How do you do it: Well, quite a few companies offer some programs Loi Pinel and yes, Allianz in partnership with Credit Foncier also does it. We have more than 25 years’ experience in it and we make sure that when we choose some residences, we use recognised builders and only 10% of the residences are used as Loi Pinel, the rest is sold as main residence to private owners to ensure that the building is not fully rented out to lodgers.
To conclude, if you don’t like paying income tax and you are thinking of building yourself a property portfolio, this is definitively for you. But be aware who you do it with. Feel free to contact me for any further information on this subject.
And check out our web site www.bh-assurances.fr/en for my previous articles on the “practical pages” and register to my Monthly Newsletter.
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