French Scellier Initiative Extended To DOMs

by Ulrika Lomas, Tax-News.com, Brussels

11 June 2009

Designed to encourage investment in property, the “Scellier” initiative, which entered into effect in France at the beginning of the year, has recently been extended to French overseas departments and territories (DOM-TOM). Indeed, the Scellier “DOM” will undoubtedly prove more appealing to prospective investors, since it will enable taxpayers to reduce their tax by as much as 52% for investments in social housing, and by as much as 40% for investments in private sector housing.

Contained in the law for the economic development of French overseas departments and territories (LODEOM), published on May 27 in the official journal, the initiative primarily aims to encourage investment in rental accommodation.

The Scellier “DOM” is intended to benefit any taxpayer currently paying in excess of EUR10,000 in tax per year, and opting to invest in a new property destined for rent. Investments in the private housing sector will entitle investors to receive a tax reduction of up to 40% of the cost of the purchase of the property, capped at EUR300,000 and spread out over a period of nine years, provided that the property is purchased before December 31, 2011.

Investors purchasing a property between January 2012 and December 2013 will be entitled to a 35% reduction in tax. Although the tax reduction for property investments realised between 2014 and 2017 will remain at 35%, the guaranteed rental period will be increased to 12 years.

In a bid to meet the urgent demand for social housing in French overseas departments and territories, investors in social housing will benefit from a greater tax incentives, and will be entitled to tax reductions of up to 52% of the cost of the property for investments realised before December 31, 2011, spread out over a period of 15 years. Other benefits include a guaranteed rental income. Provided that investors respect an imposed ceiling on rent and resources, they may also be entitled to a 30% tax reduction on their rental income.

The tax reduction may also be carried forward for up to six years.

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