Finance Act 2013: real estate tax exemptions will be spared

2013 promises to be a good year for real estate investors in France. After seeing the tax reductions from the “Loi Scellier” diminish each year, the latest announcements and rumours spread around the future Finance Act 2013 suggest that the coming year will be particularly good for those who wish to invest in France as these tax breaks will support the market.

The renewal of the “Loi Girardin” for housing in the Dom Tom, the overseas departments and territories of France, will see the continuation of a tax deduction capped at 18,000 euros for investors fiscally resident in France. The “Loi Malraux”, for investors in Historic Monuments, will also be renewed under the same conditions. Finally, the “Loi Scellier”, which was so popular and helped keep transactions numbers up over the past 3 years, will be discarded in favour of a new law which will have a tax benefit capped at 10,000 euros.

 

As the majority of the existing tax laws will be maintained, investors will benefit from as many tax reductions in 2013 as 2012. The French government has decided to take a little more time to take the full measure of the housing market and levers at its disposal to stimulate the construction of social housing. The tax incentive to increase the sale of construction land, which was recently passed by the National Assembly, will lead to the creation of new housing in 24 to 48 months. The Hollande Government think it is necessary to maintain the current tax advantages for investment in property for rental until the increase in new property construction kicks in as more land is sold for construction.

In this tense economic climate, it is likely that 2013 will be the last year to take advantage of significant tax cuts on investment in private rental investment for those fiscally resident in France. The Duflot law should allow French investors to get an interesting net investment profitability despite the capped rents provided by the law. This activity will help to support the French property market and French property prices. For the international investor, France continues to offer an attractive mix of soft property prices and French mortgage options at extremely low rates.