A new tax exemption device has been in force in France since 1 January 2018.
The “Denormandie” tax advantage allows individuals to benefit from an income tax reduction of up to 21% of the cost price of the property, capped at 300,000 euros maximum.
The Denormandie scheme is for landlords who:
buy a property to be renovated in one of the town centers eligible for the scheme;
wish to rent their empty accommodation for a long period of time, for 6, 9 or 12 years.
This income tax reduction applies both to taxpayers domiciled in France at the time of the investment and who have their property renovated, and to those who purchase from a developer who has had the building renovated.
Five conditions must be met to benefit from the “Denormandie” tax advantage:
1 – It must be an acquisition made between January 1, 2019 and December 31, 2021;
2 – The property must be located in one of the 222 municipalities included in the “Plan action cœur de ville” or in a municipality that has concluded territorial revitalisation operations (ORT). The list of eligible cities will be available in the coming weeks.
3 – The amount of the work, “invoiced by a company”, must represent at least 25% of the total cost of the operation corresponding to the price of the property and the acquisition costs. It should not be a “refreshment” work;
4 – The property must be rented unfurnished at a so-called “intermediate” rent. The tax exemption will depend on the duration of the rental commitment made by the buyer.
6 years – 12%.
9 years – 18%.
12 years – 21%
5 – The maximum amount eligible for the Denormandy reduction is 300,000 euros, i.e. 63,000 euros in total, which will be spread over 12 years, with 6,000 euros per year for the first 9 years and 3,000 for the following years.
The reduction will be included in the calculation of the cap on tax niches, which is currently €10,000 per year.