Two subjects of news about taxes:
Tax reduction named “DENORMANDY” on real estate investment
Ten years of recovery for non-declaration of account abroad
Among these two topics, the first will concern investors in rental property located in the city centers and the second concerns all French residents with at least one bank account abroad.
I – Reduction of income tax “DENORMANDIE”: (Actuality BOFIP May 31st 2019)
The general conditions that the investment must meet
- The investor must be domiciled in France on the date of completion of the investment.
- The investment must be made no later than December 31, 2021. The completion date is defined as follows:
- Acquisition of renovated or converted housing: This is the date of acquisition,
- Acquisition of a dwelling to be renovated or premises to be converted into housing: date of completion of the work,
- Subscription of shares of S.C.P.I .: Date of subscription of the units.
Dwellings affected by the measure
The income tax reduction applies to:
- Purchases of renovated housing on the initiative of the buyer or seller.
The eligible renovation works are as follows:
- Modernization, sanitation or layout,
- Achievement of energy savings,
- Creation of habitable surfaces.
In case of acquisition of renovated housing, it must not have been occupied since the completion of the works.
- Acquisitions of various premises to be converted into housing or housing resulting from the transformation of a local.
Proportion of works to be done:
Renovation or conversion work must be carried out by a company and they must represent at least 25% of the total cost of housing.
The total cost price includes:
- The purchase price of the premises,
- The expenses related to the purchase,
- The cost of the work done by the companies.
Location of housing and premises:
This tax system applies to housing and premises located in the center of municipalities that have:
- Either a need for rehabilitation of very marked habitat (Action Plan heart of the city) “Plan action Coeur de Ville”; the list of municipalities is appended to the decree of March 26th 2019 (CGI annexe IV art. 18-0 bis D).
- Either concluded a territory revitalization agreement “Convention d’Opération de Revitalisation de Territoire” (O.R.T.). Law 2018-1021 November 23th 2018.
Energy performance of housing after works
Housing in metropolitan France:
- Conventional consumption in primary energy of renovated dwellings must be less than 331 KWh / M² / year after achieving a decrease of at least 30% for individual dwellings (20% for collectives), or…
- The housing complies with the energy performance standards stipulated by decree (we can give you the exhaustive list of these standards on your request).
The law provides for a set of thermal and energy requirements that must be met by apartments located in these areas. These must be examined on a case-by-case basis.
The conditions of the rental
- The taxpayer must make the commitment to rent the property as a main residential for 6 or 9 years with the possibility of extension of 3 years (or 6 years in case of first commitment of 6 years).
- The commitment must be made within 12 months of the date of acquisition or completion of the works.
- The renter must respect a ceiling of rent according to the surface of the flat and the zone in which it is located.
- The tenant’s resources must not exceed a certain threshold. (We can of course give you these amounts).
Calculation of the tax reduction
The basis of calculation is the cost price of the building, i.e. the purchase price plus taxes, fees and commissions paid at the time of purchase, as well as the total cost of renovation works.
This amount is capped at a time at a total of € 300,000 and € 5,500 per square meter of living space.
The rate is as follows:
- Rental commitment of 6 years:
- 12% (or 23% for an overseas investment),
- +6% for an extension of 3 years,
- +3% for an extension of 3 additional years.
- Rental commitment of 9 years:
- 18% (or 29% for an overseas investment),
- +3% for an extension of 3 years (additional extension is not possible in this case).
This tax reduction is spread over 6 or 9 years. It is deducted from the income tax due for these same years. In case of extension, the reduction is spread over 3 years for each extension.
The number of investments is limited to two per year. In addition, both acquisitions made as part of the “PINEL” and “DENORMANDIE” devices must be taken into account.
II – Ten years of resumption for failure to declare foreign accounts (Actuality BOFIP May 22nd 2019)
In case of non-declaration to the tax administration of the accounts opened, held, used or closed abroad, the recovery period is now passed from 3 to 10 years. This statement must be made at the same time as the income tax or profit and loss statement.
Conditions for applying the 10-year recovery period
- To allow the administration to extend the recovery period to 10 years, the total credit balances of the accounts abroad must exceed € 50,000 on December 31st of the year concerned.
- However, for non-prescribed returns on October 25th 2018, the balance amount is appreciated throughout the year. Thus, in order to avoid the application of this right of recovery, the taxpayer must show that at any time in the year in question, the total creditors of his accounts abroad were less than € 50,000.
Consequences of the extension of the recovery period
- The recovery period of the administration goes to 10 years except during the years 2019 to 2024 due to the progressive entry into force of this device.
- The time available to the taxpayer to submit his claims is equal to that of the administration.
If you need more explanations, feel free to contact us!
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