Real Estate : Focus on the Malraux tax device

17 February 2017

Established in 1962 by André Malraux, the Malraux Law allows to deduct tax on the amount of work realized in the context of a restoration of classified property. This system appeals to private investors to rehabilitate the “Patrimoine de France” that is french heritage.

Who can benefit ?

Since January 1, 2013, the Malraux device has been targeting French resident taxpayers who invest in apartments to be renovated and intended for rental.

Conditions to qualify for this scheme:

To benefit from Malraux device benefits, you must meet the following requirements:

  • Acquire an old property, in a building that will undergo a complete restoration.
  • The building must be in a well-defined area: “a remarkable heritage site” or a neighborhood with a high concentration of old degraded habitat.
  • You must rent this property for 9 years from the completion of the works. The property must be empty and must serve as the tenant’s main habitation.
  • The works undertaken must absolutely benefit of a special authorization of the Prefect and then be followed by the Architects of the buildings of France.

What is the tax advantage of this scheme?

The 2017 Malraux scheme gives the right to an income tax reduction calculated on the amount of restoration work undertaken by the taxpayer in the amount of:

– 30% for buildings located in a Remarkable ans approved Heritage Site PSMV (protection and development plan), QAD (old degraded districts) and NPNRU – Old safeguarded areas;
– 22% for buildings located in a remarkable heritage site with approved architectural and heritage valuation plan (PVAP) or whose restoration program has been declared to be of public utility. – Former ZPPAUP and AVAP.

The amount of work for the calculation of the tax reduction in Malraux 2017 law is retained within the annual limit of € 100,000.

When the property is held in undivided ownership, each undivided beneficiary shall benefit from the tax reduction calculated on the fraction of eligible expenses corresponding to his rights in undivided ownership.

  1. Saved areas having “a historical, aesthetic or similar character to justify the preservation and enhancement of all or part of a group of buildings” and recognized as such by order of the prefect of the department.
  2. The architectural, urban and landscape heritage protection zones (ZPPAUP) have been replaced since 2010 by the architectural and heritage enhancement areas (AVAP). Following a public inquiry, the restoration work is declared of public utility. The file specifies, for each building, the works and their deadline for completion.

Districts with a high concentration of degraded old housing, the list of which is to be fixed by decree, can also benefit from the tax reduction.

What types of expenses can benefit from a tax reduction?

  • Real estate restoration works carried out with a view to the complete restoration of a built-up building assigned to the dwelling or to be reassigned to the dwelling.
  • Ordinary charges (insurance premium, management fees, etc.).

Good to know

With a Malraux device, a lessor must annually inform the “Declaration No. 2042 Complementary”. In the first year, he must also enclose a letter of commitment.

For more information on this subject, do not hesitate to contact us here.

Cabinet Roche & Cie, Chartered accountant in Lyon, France.
Specialist in Real-Estate and Non-Résidents.

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