The Duflot law: how to reduce taxes when buying a new home in France
From 1 January 2013 in France, the law Duflot (Duflot loi) under which it is possible to reduce taxes by renting, purchased or constructed housing for nine years. This mechanism will be valid until 31 December 2016.
Until 2013, instead of the law Duflot had the law Selye (loi Scellier), in which it was possible to return 6 % (for conventional houses) or 13 % (for energy efficient buildings) of the property value if housing is rented for nine years. You can often hear the opinion that the old law was more profitable than a new one, but it is not.
“Law Duflot more interesting than Selye, but much more technical, and not all understand its features. This explains the criticism. In addition, the Minister cécile Duflot unpopular: sometimes bias towards the Minister applies to the law, which he initiated,” says Lara Paranan, Director of the Department of Eastern Europe AS et Associés.
According to the law Duflot investor who bought property in a specified period of time, can receive a tax deduction of 18% of the value of the object if:
- the amount of investment does not exceed 300 thousand euros;
- price per 1 m2 — 5 500 Euro;
- housing will be leased for a minimum period of nine years and not later than 12 months after completion;
- rental rates do not exceed the maximums stipulated by the legislation;
- the size of the income of future tenants corresponds to the selected threshold.
- housing corresponds to a certain level of energy efficiency (BBC 2005 — for facilities constructed before December 31, 2012, or RT2012 — for units built after January 1, 2013).
According to the law Duflot, you can buy a maximum of two per year with a total value of 300 thousand euros. The one who decided to buy an apartment in France that is most advantageous to buy studios and one-bedroom apartments — they are most in demand among tenants. Gross yield is an average of 3.5–4 %. Tax credits are valid for nine years.
“You can deduct a maximum of € 6,000 per year for nine years — a total of 54 million euros for the whole period,” explains Lara Paranan.
Rental rates under the law Duflot account for 80 % of the market fees for rental housing. They change every year. The tenant may not be a member of the owner’s family.
To find the area of housing and restrictions on the rent, you need to use the formula: 0,7+19/P (P — living area and half of the outbuildings (cellar, basement, balcony), whose area is a maximum of 8 m2). Maximum rents for this object — 636 € (65*9,88*(0,7+19/65)).
The maximum rental rates, EUR/m2 (2013)data AS & Associés
| Area A bis | Of 16.52 |
|---|---|
| Zone A (the rest areas) |
12,27 |
| Area B1 | For 9.88 |
| Area B2 | 8,59 |
Area A includes many municipalities in the Ile-de-France, Cote d’azur and the French part of the Geneva agglomeration, zone A bis — Paris 29 communes and small crown capital, B1 the big crown of Paris agglomeration with the population over 250 thousand people.
The area B2 includes the Metropolitan area with a population less than 250 thousand people. 30 June 2013 benefits for this zone are not applicable, however in half of these municipalities discussed the possibility of participation in the program indicated by the Duflot law.
The maximum level of income of future tenants, the Euro gadanie AS & Associés
| For one man |
For couples | |
|---|---|---|
| Zone A | 36 502 | 54 554 |
| Area B1 | 29 751 | 39 731 |
| Area B2 | 26 776 | 35 757 |
For example, in 2013, a natural person acquires a new apartment of 65 m2 in Lille (Zone B1). Such housing will meet the thermal regulation RT2012. The investor can benefit from a tax deduction in the amount of 4 200 euros per year for nine years. Total savings will amount to 37 800 euros.
Considering the price and the rental cost is the most cost-effective area B1, especially Bordeaux, Lille, Lyon, Nantes, Rennes and Strasbourg. It is not necessary to write off the Paris suburbs, zone A — Gennevilliers, Montreuil, Chatillon. The gross yield of the local apartments of 40 m2 stands at 5.5 %.
According AS & Associés, when you buy an object worth 200 thousand euros in monthly mortgage costs with benefits can theoretically be 407 Euro — thanks to the law Duflot in this case the saved 333 euros per month.
Example expenses when buying a loan facility worth 200 thousand euros in masangane AS & Associés
| Mortgage payments | 1 228 |
|---|---|
| Rental income | 488 |
| The tax credit | 333 |
| Total expenditures | 407 |
This mechanism can take advantage of when subscribing to securities Civil company real estate (Société civiles de placement immobilier, SCPI), if 95 % of the assets are objects that fall under the category of tax law Duflot. In this case, the tax credit will amount to 18 % of 95% of the subscription price for the securities.
* * *
“Duflot and similar laws aimed at sectors where the necessary state subsidies. The laws related to real estate, the state wins twice: first, it gets VAT (19,6 %) and partly from returns, but not immediately, but within 10-11 years (one to two years of construction and nine years of rent). Second, these laws allow us to reduce and control the market rent and to make rental housing more affordable for poor people,” explains Lara Paranan.
Yulia Kozhevnikova, Tranio.Ru
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