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While other countries wonder what to do about their plummeting property markets, Nickolas Sarkozy (French President) recently announced new initiatives for the French Domestic housing market. Like the Germans and their scrapage deal to boost their domestic car sales, Sarkozy has created a boom in domestic property purchases in France.

What does this mean for the foreign investor? This is excellent news for both those who have already bought in France and for those who intend in investing in the future of French property. Property prices in France dropped 3.1% last year. When you compare this to other property markets or the stock market this seems quite a good reaction to these stressful times. Couple that with this new initiative and you can see that French property investment is not only holding its own but is prepared to hold its own now and into the future.

Scellier Scheme (loi Scellier)

A new, remarkable scheme which favours rental investment
and an income tax reduction of up to 37% over 15 years!

What is the “Loi Scellier”

On the 1^st of January 2009, a new tax incentive scheme to encourage investment in rental property was launched in France. It is called the “Loi Scellier”. It gives the opportunity to claim a tax reduction equivalent to 25% of the property purchase price for 9 years (on purchases up to €300 000).

The Scellier legislation also includes a social housing version called the “Scellier Social” scheme. As long as your tenants’ income does not exceed the upper qualifying limit, you can extend your rental commitment. It is possible to reclaim up to 37% of your property purchase price over 15 years!

The Scellier tax allowance scheme offers a direct reduction on your income tax bill rather than a reduction of taxable income.

In order to benefit from the tax allowance the owner is obliged to rent out the property for a minimum of 9 years.  The Robien and Borloo laws stipulated the same provision.
The Scellier law permits one purchase per year.  The investment limit is €300,000 per year.

If you buy between 1 January 2009 and 31 December 2010

You will receive a tax reduction equivalent to 25% of the property purchase price up to a maximum of €75,000 (on the maximum purchase price of €300 000). This is spread evenly over a period of 9 years.

• 25% of the value of your property over 9 years with the standard Scellier scheme 

If you buy between 1 January 2011 and 31 December 2012

The scheme will still apply, but the tax reduction will be 20% (rather than 25%) of the price of the property over the first 9 years. The Scellier Social scheme will also still apply.

What homes qualify Scellier scheme

In order to qualify for the benefits offered by the Scellier scheme, your property must be located in an area of housing shortage.

• the home must be newly completed or bought off-plan prior to completion (VEFA in French) 
• it must be purchased between 1 January 2009 and 31 December 2012
• it must be let unfurnished for at least 9 years, with the tenancy beginning within 12 months of completion of construction work or the date of purchase
• its insulation and energy performance levels must comply with the regulations applicable at the time development consent was applied. A property purchased in 2010 must therefore comply with the RT2005 construction standard
• it must be located in an eligible location.

What is the maximum amount of tax benefit I can claim?

The total investment is capped at €300,000. The tax reduction you receive (on investments made in 2009 and/or 2010) under the Scellier Social scheme can amount to 37% of the amount you invest, if you extend your rental commitment from 9 to 15 years.
So the maximum tax reduction available is €111,000 over 15 years!