french property (1)
THE FRENCH LEASEBACK SCHEME
know how the tax incentive works.
The French Leaseback scheme is one of the best ways to invest in the French real estate market. It is very effective and can allow you to invest for the future while enjoying part time of the property. It demands close attention to details though and the ability to secure an investement in the most attractive regions of the country.
Investing in a real property that is rent furnished entitled the owner to benefit from a tax scheme which is very enticing whether you are resident in France or whether you are resident outside of the country. Be aware that there are conditions to be met and seek professional advise. Keep in mind that time is of essence and that filing the proper forms in due time is crutial to secure complete advantage of the tax scheme.
If you are a resident, you are entitled to a tax credit of 25% à the investment (but you may not amortize the cost of the property)
If you are a non-resident, you may depreciate the property and take a deduction from the amortization plan of your investment.
In both cases the favorable tax treatment can help you maximize your investment and get rental income at a very low level of taxation or even being completely tax-exempt.
Moreover, in both cases you can also obtain the refund of VAT tax credit - which increases your return on investment (ROI) and greatly facilitates the funding of the investment. Your downpayment is substantially reduced due to the repayment of VAT credit.
1 - WHAT ARE THE FEATURES OF THIS TYPE OF INVESTMENT?
> Tax incentives - for residents
You could benefit from a tax credit equal to 25% (in 2010) of the property value within the limits of 300 000 euros. The tax credit will probably be reduced to 18% in 2011 and 2012. But the tax is confirmed to be effective in the future.
* You can also claim the refund of the VAT tax credit - without any limitation on the amount.
> Tax incentives - for non-residents
You can depreciate the property in addition to deducting all other expenses - which reduces or cancels your taxable income on this investment.
* You can also receive reimbursement of VAT credit - without any limitation on the amount.
2 - WHAT ARE THE RISKS?
> Is the real estate asset of good quality? Although tax incentive is important, you must make the investment with the same due care that applies in every regular investment. Care should be taken first to acquire property that meets the demands of a local market. You must also consider the resale and potential capital gain.
>Is the real estate asset sold at the "right price"? The assets will be of good quality, but must be acquired at a fair price. If you buy an asset overvalued, we will only have a limited profitability.
> Obligation to comply with certain tax conditions. The benefit of tax reduction or tax amortization plan is subject to a tax option to be exercised by the investor when filing the tax return the year of completion of the building or acquisition, whichever is later. This option is irrevocable for the housing and is construed as the owner's commitment to rent the unit for at least nine years.
3 HOW SHOULD I PROCEED?
It is necessary to make an investment choice that meets the need of an active market. Seek experienced professionals who are used to networking with other professionals and are able to select the best possible products.
To know how to structure a French Leaseback Scheme, go to our dedicated website:
FRENCH LEASEBACK
explained by French Former Tax Inspector