Since 1 September 2014, prospective real estate investors in France have a new tax-advantaged investment option. Created under the Pinel Act, the new 'Pinel plan' is similar to the previous Scellier and Duflot plans, which it has superseded.
As with its predecessors, the Pinel plan is intended to encourage investment in new housing construction by offering investors a tax reduction of up to €63,000 on their personal income tax.
However, paying less taxes must not be the sole motivation for a real estate investment, which should be considered within an overall framework of wealth diversification. The tax reduction is subject to restrictions and you should seek assistance from a rental property investment professional.
You must keep in mind that you will lose your tax advantage if you fail to comply with your rental obligations..
(1) There are three degrees of property ownership:
1. Full ownership, which entitles the owner to use the property, to receive income from it and to freely dispose of it (i.e. sell or rent it).
2. Bare ownership, which includes the right to dispose of property but not to use it nor receive income from it.
3. Usufruct, which includes the right to use property and receive income from it, but not to dispose of it.
More information on renter income and rent caps is available on the service-public.fr website.
An apartment is purchased for €150,000 and the rental commitment is six years: The annual tax reduction is (€150,000 x 12%) / 6 = €3,000 a year for six years, for a total reduction of €18,000.
An apartment is purchased for €200,000 and the rental commitment is nine years: The annual tax reduction is (€200,000 x 18%) / 9 = €4,000 a year, for a total reduction of €36,000.
A house is purchased for €300,000 and the rental commitment is twelve years: The annual tax reduction is €6,000/year during the 9 first years, then €3,000/year during the last 3 years, for a total reduction of €63,000.
A tailored solution
Would you like to take advantage of the Pinel Act? A Barclays advisor can help you determine whether a Pinel investment is a good fit with your wealth management strategy. If so, he or she can point you in the direction of our subsidiary Barclays Diversification SA, whose experts can show you properties that match your needs and assist you with purchasing.