Investing in prestigious real estate in France not only allows you to increase your wealth and enjoy an exceptional environment, but also, under certain conditions, benefit from tax reduction schemes.
Taxation of occupied prestigious properties
When prestigious properties are occupied by their owners, the tax regime that applies is the same as for ordinary real estate. Owners of such properties will therefore have to pay property tax and residence tax. These local taxes vary depending on the rental value of the property. In the event of a sale of the property and if it is a primary residence, the owner will have to pay a capital gains tax, unless the property is sold after 5 years of ownership. If it is a secondary residence, capital gains will be subject to tax if the property is sold before 35 years.
Taxation of rented prestigious properties
In the case of renting prestigious properties, several situations must be distinguished. The most interesting regime for owners of prestigious properties that they wish to rent is to apply the actual regime for rental income. However, it is in the field of luxury properties to be renovated that the French tax regime is most interesting, allowing owners to enhance their wealth while deducting costs.
The actual regime for rental income
As the owner of prestigious properties, when you receive rental income, it is interesting to deduct from these rental income all the expenses incurred during the year for the maintenance of the property: maintenance work, property taxes... The rental income that appears as a result of this deduction of expenses is added to the owner's overall income, and will therefore be subject to personal income tax (IRPP), CSG (General Social Contribution) and CRDS (Contribution to the Repayment of the Social Debt).
Deficit foncier
If the amount of renovation, maintenance, and improvement works on the prestigious property exceeds the rental income, the owner will benefit from what is called a "deficit foncier". This deficit can be carried forward to subsequent years or deducted from the owner's overall income up to a maximum of €10,700 per year, for a maximum period of 10 years.
The Malraux Law scheme
The Malraux Law, dating back to 1962, allows for investment in a character building and benefits from a tax reduction scheme. The owner benefits from a tax reduction on the amount of the work carried out:
- 30% for buildings located in a "protected" area;
- 22% for buildings located in a ZPPAUP (Zone of Protection of Architectural, Urban or Landscape Heritage). The deduction for works is limited to €400,000 for a period of four consecutive years. Please note: the works must be supervised by the Architects of France. The Malraux tax reduction scheme is extended until December 31, 2022.
A team of professionals at your service
For over 40 years, the professionals at Michaël Zingraf Real Estate have been accompanying you in all your luxury real estate investment projects. With their in-depth knowledge of the French Riviera, Provence, as well as Deauville, Paris, or Uzès, our teams guide you professionally in all your real estate buying or selling transactions.