The real estate tax exemption concerns tax measures put in place by the French State to push companies to build new housing, on the one hand. The objective is to preserve as much as possible the French real estate heritage. The state seeks to alleviate the housing shortage through these measures.
In this context, people who decide to invest as part of a real estate tax exemption measure may be eligible for a reduction in their taxes. Depending on the geographical area, this reduction may be more or less important. For example, the Pinel Overseas Law is very interesting for individuals seeking to invest in these territories.
Pinel Law: support for real estate tax exemption in Overseas France
Since January 2013, the Pinel Outre-mer law has regulated the real estate tax exemption which concerns overseas departments, regions and communities (DROM-COM). For individuals who wish investing in Overseas France, this law offers tax reductions for various types of investment: the acquisition or construction of a new home.
Real estate tax exemption in Overseas France: how does it work?
According to the provisions of the Pinel law, the investor benefits from a tax reduction from of the year in which he acquired or completed the construction of the dwelling. The amount of this reduction changes according to the duration of the rental commitment. For a commitment of 6 years, for example, the reduction is 23% of the purchase price housing. Over 9 years, 29% and over 12 years, 32%.
NB: the tax reduction of the Pinel Outre-mer law is calculated on an amount that is capped at €300,000 (expenses notary included). Furthermore, this Overseas property tax relief law cannot concern more than 2 dwellings over a year. The purchase price per square meter of living space is capped at 5,500 €.
In addition, if ever the tax reduction is greater than the tax due for the year, you cannot carry forward the excess to subsequent years. Finally, the buyer has the possibility of renting his accommodation to his children or to his parents while benefiting from the device of the Pinel Outre-mer law.
What are the conditions to be met to obtain real estate tax exemption in Overseas France? ?
In order to benefit from the advantages offered by the Pinel Overseas Law, the investor must agree to rent the bare accommodation to a tenant as their principal residence. The owner must also respect the 3 durations of above rental: 6, 9 or 12 years old.
Unfortunately, since January 1, 2021, single-family or semi-detached houses are no longer concerned by this device defiscalisation real estate in Overseas. Today only the dwellings located in a collective apartment building are eligible. Furthermore, it is necessary that the housing is occupied within 12 months after its completion or acquisition. Finally, the Pinel Outre-mer law imposes :
- A monthly rent ceiling. The latter varies according to the surface and the location of the accommodation;
- A resource ceiling for the tenant.
If the investor does not meet one of these criteria, he automatically loses the benefits of the Pinel law Overseas.
At what amounts are the monthly rent ceilings set?
In order to benefit from the real estate tax exemption in the Overseas Territories proposed by law Pinel, it is therefore necessary to respect monthly rent ceilings. These limits vary according to the territory where is the accommodation:
- In Réunion, Guadeloupe, Martinique, Saint-Barthélémy, Mayotte and Saint-Martin, this ceiling is set at €10.55 per square meter;
- In New Caledonia, French Polynesia, Wallis-et-Futuna or Saint-Pierre-et-Miquelon, the ceiling is fixed at €12.83 per square meter.
In addition, it is necessary to add the following surface multiplier coefficient: 0.7 + (19 / surface in m2). Let's take the example of a 40 m2 apartment located in Reunion. We start by applying the coefficient on the surface:
- 0.7 + (19 / 40) = 1.175
We then perform the following calculation to determine the rent ceiling:
- 1.175 x 10.55 = €12.40 per m2
What are the resource limits for tenants?
The Pinel law on defiscalization of real estate in the Overseas Territories also provides for a cap on annual tenant resources. Again, the location of the accommodation comes into play. Here, no calculations, but annual salaries fixed in advance.
Martinique, Guadeloupe, Réunion, Guyana, Saint-Barthélémy, Saint-Martin, Mayotte
French Polynesia, Wallis and Futuna, Saint-Pierre-et-Miquelon, New Caledonia
- Single person:
- €28,606
- €31,099
- Couple:
- €38,202
- €41,528
- Single person/couple with dependent:
- €45,941
- €49,941
- 2 dependents:
- €55,461
- €60,290
- 3 dependents:
- €65,241
- €70,923
- 4 dependents:
- €73,527
- €79,928
- Surcharge for each additional dependant:
- €8,206
- €8,920
Example: suppose you buy a 75 m2 apartment at €300,000 (notary fees included) located in La Meeting. This property generates maximum monthly income of €751.50, or €9,018 per year. You have decided to rent this housing in Overseas France for 6 years. You benefit from the following property tax exemption:
- 300,000 x 23% = €69,000
- 69,000 / 6 = €11,500
You benefit from a tax reduction of €11,500 per year.
Century 21 Cirick's opinion on real estate tax exemption in Overseas France
The Pinel Overseas Law is one of the most effective property tax exemptions in Overseas interesting. It can indeed make you benefit from a tax exemption reaching 32% and comes into force immediately after acquiring the home. The Pinel law allows you to kill two birds with one stone by reducing your taxes while building up real estate assets.
Despite everything, this system defiscalisation real estate in Overseas has many constraints: ceiling on the purchase price, the rent, the tenant's income, etc. In order to make an investment winner, it is important to choose the location of the property well and to correctly estimate the rental profitability. In this context, calling on a trusted professional is essential.
If you wish to invest in real estate in the Overseas Territories and benefit from a tax exemption, Century 21 Cirick, real estate agency in Martinique, accompanies you during all stages of the process.
