France increases tax cuts for residential landlords

The French government seeks to reinvigorate the residential real estate market with tax deductions for landlords.

The residential market in France has been suffering from a rent-to-wages ratio imbalance and high unemployment rates, further worsened by the COVID-19 health crisis. In order to revitalise the construction industry while ensuring access to affordable accommodation for renters, the French government has amended the Pinel law that offers tax cuts for rental property owners.

This law was renewed in January 2020 by the French Parliament with one important change. According to French fiscal advice site Tacotax, 2020 is the last year during which investors can take advantage of the program to build or buy houses, after which, the law will only apply to apartment buildings.

The attractiveness of the Pinel law for potential landlords lies in the tax cuts for investors who meet a specific set of requirements. Renting out a Pinel-compliant house or flat for 6 years gives the landlord right to a 12% tax cut on the total property investment. This tax cut grows to 18% when rented for 9 years and 24% for 12 years.

To take advantage of tax cuts offered by the Pinel law, there are a number of requirements:

1. Build or buy a new property located in approved geographical zones:
   1. Zone A-Bis: Paris and its immediate outskirts
   2. Zone A: France’s 650 biggest urban agglomerations
   3. Zone B1: Cities with more than 250,000 inhabitants
2. Rent the unfurnished property for 6–12 years within 24 months of purchase
3. Household income of renters must meet specific thresholds
4. Annual rent must not exceed a certain threshold (by geographic zone)
5. Buy no more than 2 properties per year, for a total annual sum of €300,000
6. Buy (or resell) the property for less than €5,000 per square meter

French legislators tailored this law to stimulate construction and residential real estate sales in dynamic regions while providing low-income families with affordable accommodation in expensive cities. By doing so, they hope to boost employment while still meeting the investment expectations of private landlords.

Author: Paul Cziganj