Invest Overseas the media for success
Tax relief, Pinel law, Girardin, new programs: understand everything to invest peacefully in real estate in Guadeloupe, Martinique, Reunion, Mayotte and Polynesia.
Why should you invest in Dom Tom?
You are interested in real estate on the island of Reunion or in another DOM-TOM territory but you doubt the benefit of investing under the Pinel Law Overseas ? Various reasons may lead you to use this tax relief tool. First of all, it offers higher returns than Pinel applied in mainland France. The reduction rates are increased by 11%, new real estate in overseas territories thus presents great attractiveness.
If you think you do not have sufficient income to repay a loan of several hundred euros each month, the tax relief operation can help you finance it. You can seek to realize a capital gain by selling a real estate property 974 in about ten years, at the end of the rental period. Real estate on the island of Réunion is likely to attract your attention if you wish to diversify your investments. Another interesting aspect characterizes Pinel Overseas, it is the possibility for the investor to house their ancestors or descendants. This opportunity did not exist for a new real estate project in Réunion, undertaken with the Duflot law.
The Girardin Scheme
Another incentive scheme for rental investment was used by many French taxpayers, this is the Girardin Overseas law. It also gave the right to tax reductions for a real estate investment in Réunion. The tax advantage is calculated by multiplying the number of square meters of the dwelling by a base amount, set at 2,645 euros TTC for the DOM. You must then apply a percentage to obtain the tax reduction.
Learn more about the Girardin Overseas law → Also read : Why invest in a house to renovate?Tax relief under the Pinel Law Overseas
Understand in detail how the Pinel scheme works applied to overseas territories: principle, conditions, caps and tax reductions.
Principle of Pinel, the overseas tax relief tool
The Pinel Law Overseas (formerly the Duflot law and Scellier Law Overseas) concerns on the one hand investments made in DROMs (Departments and Regions of Overseas France). On the other hand, this scheme offers advantages for individual investors in real estate in COMs (Overseas Communities). Pinel overseas tax relief is thus possible in Guadeloupe, in Martinique, in Mayotte or even on the island of Réunion.
The principles of the Pinel law have been understood by many individual investors. Indeed, they used it to access property ownership or increase their real estate assets in the overseas territories, following a Overseas real estate investment. Overseas, tax deductions were possible a few years ago with the Scellier scheme, then the Duflot scheme, and since September 2014 with the Pinel law. It is characterized by three different reduction rates.
Overseas taxation under this scheme is very advantageous as it allows reduction rates of 23 and 29% for respective rental commitments of 6 and 9 years. The maximum tax reduction equivalent to 32% of the property value is granted to owners who rent out their new apartment for at least 12 years. Overseas, tax deduction gives taxpayers the possibility of deducting several thousand euros per year.
Investing in new real estate overseas with Pinel
The Pinel scheme designates a law and a tax deduction tool. It allows taxpayers to access property ownership and benefit from advantageous financial conditions. The tax relief offered to investors allows them to bear more peacefully the burden of the loan they have contracted. The real estate property must necessarily be completed within 30 months following the date of signing the deed.
The realization of a Reunion real estate project with a rental period of 9 years allows obtaining a reduction rate of 29%. The maximum reduction rate is 32%, it is granted for the rental of a new apartment for 12 years. Several types of real estate housing on the island of Reunion are eligible for this scheme. On the one hand there are homes in future state of completion, on the other hand apartments and houses purchased new. Old dwellings subject to rehabilitation work are also concerned.
Obligations to respect
The Pinel scheme is governed by several limits that investors are obliged to respect. The amount of investment in a new real estate project in Reunion giving entitlement to tax reduction is limited to 300,000 euros. Furthermore, the acquisition price must not exceed 5,500 euros per square meter. Moreover, the legislator had decided to limit the number of acquisitions to 2 properties per year.
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Investment ceilings
Two ceilings furthermore frame the Pinel Overseas law. They concern rental terms. Rents must not exceed €9.88 per square meter in Guadeloupe, Mayotte or Reunion. For example, a new property in Reunion with an area of 40 square meters cannot be rented for more than €395. For a 60 square meter apartment, the ceiling is approximately €593.
On the island of Reunion, real estate is frequently a source of problems for the most modest households. The Pinel system must promote housing for low and middle incomes. Tenant income ceilings are in force in all French overseas territories. For example, a single person is limited in 2015 to €27,359 in the Antilles. For any investment in new real estate in Reunion under the Pinel law, the new owner is obligated to rent the apartment to a couple with no more than €36,536 in annual income.
Tax reductions with the Pinel Law
For an apartment valued at €160,000, the minimum and maximum tax reductions are €36,800 and €51,200. Overseas taxation allows in the first case to reduce the amount owed to the tax authority by €6,133 each year for 6 years. In the second case, the Pinel law provides the opportunity to deduct €4,122 per year for 12 years. In Overseas territories, tax relief is possible in Reunion, Guadeloupe, Mayotte and also French Polynesia.
Tax relief overseas: what's changing
People who already benefited from overseas tax relief in 2012 or 2013 with the Duflot Overseas law should pay close attention to the terms of the new Pinel system. Indeed, it remains much more attractive than its predecessors. Overseas tax relief allows for example to benefit from a tax reduction equivalent to 32% of the value of a property on the island of Reunion, in the French overseas territories. The same type of operation offered only a tax reduction of 29%.
From now on, the tax reduction for the same type of property is likely to reach €32,000 over 12 years. Another non-negligible aspect also helps distinguish the Scellier system from the current law. This is the acquisition ceiling per square meter, currently limited to €5,500 compared to €4,000 a few years ago. The 2012 overseas tax relief law did not allow investors to have their apartment occupied by their children or parents, this is now a possibility offered with current overseas taxation.
Investment simulation
You have fallen in love with a new apartment in Saint Denis. It symbolizes current real estate in Reunion (974), meaning it features the thermal characteristics of RT 2012 and proves to be a good investment for the future. This real estate project on the island of Reunion has a cost price of 150,000 euros, it is a 50 square meter accommodation. It respects one of the ceilings of the Pinel scheme, since the law stipulates that each apartment of 50 square meters cannot exceed the value of 275,000 euros (50 × 5,500).
Furthermore, this real estate purchase in Reunion does not exceed the total investment amount set at 300,000 euros per year. The savings you can achieve are like those of overseas tax relief for a business. If you rent it from 2016 to 2021, you will be able to deduct 34,500 euros from your taxes over 6 years. In the event that you rent this apartment from 2016 to 2024, it is a tax reduction of 43,500 that you will benefit from with this real estate purchase in Reunion. A tax rebate of 48,000 euros is granted to you if you extend the rental for an additional 3 years. This 974 real estate project thus presents genuine appeal.
Another example of simulation. Let's take a fictional example of an investment with the Pinel DOM-TOM law. For the purchase of an apartment valued at 220,000 euros, the individual has the right to deduct 63,800 euros (220,000 × 0.29) from their taxes for a rental term of 9 years. The Pinel Overseas SCPI gives the same types of advantages for those who do not want to carry out the operation directly as a private individual.
Reasons to invest in Pinel
Several reasons could motivate you to take advantage of tax relief overseas with Pinel.
Increased reduction rates
You might want to benefit from the increased reduction rate and favor a new program in Overseas territories, in Reunion or Mayotte rather than in the city where you reside in mainland France. The financial advantages of overseas real estate tax relief play a crucial role for certain taxpayers who would not have had the opportunity to own property if the reduction rates were much lower. The need to invest in an energy-efficient building is a form of constraint that is ultimately positive. You have no major work to implement following this overseas tax relief operation.
Benefit from rental income
With the implementation of overseas real estate tax relief, renting directly generates an additional income stream that can be used to live more comfortably. It can also be a dream to have a base in the Tropics for retirement.
Significant savings
French taxpayers who become owners of a new property have the opportunity to make significant savings. The Pinel Outre-Mer law makes property ownership more accessible as it provides the possibility of reducing taxes by thousands of euros per year, in the DOM-TOM such as the island of Réunion for example. People who use this tool can deduct a percentage of the value of the real estate property they have purchased from their taxes. The Pinel Ultramarin scheme stipulates that a rental commitment of 6 years entitles you to a tax reduction rate of 23%. Rental commitments of 9 and 12 years allow them to benefit from respective rates of 29 and 32%.
Housing an ancestor or descendant
Another interesting aspect characterizes the Pinel Outre-Mer, this is the possibility for the investor to house their ancestors or their descendants. This opportunity did not exist for a new real estate project in Réunion, undertaken with the Duflot law. A valuable flexibility for families wishing to offer housing to a student child or a retired parent in the DOM-TOM, while benefiting from the tax advantage.
Schemes and programs to explore
Pinel Outre-Mer is not the only lever for investing in the DOM-TOM. Discover the other tax reduction schemes and real estate programs available.
Girardin Outre-Mer Law
Tax credit based on surface area: m² × 2,645 € (base). A scheme complementary to Pinel to maximize your tax reduction on overseas territories.
→ PRGNew programs
Discover new real estate programs eligible for Pinel Outre-Mer in all DOM-TOM.
→ DOMThe DOM-TOM
Réunion, Guadeloupe, Martinique, Mayotte, French Guiana, Polynesia… Overview of eligible territories and their specificities.
→ INVReal estate investment
Complete guide to real estate investment in the Overseas: strategies, advice and pitfalls to avoid.
→ RNVInvesting in a house to renovate
An alternative to new: acquire a property to renovate in the French Overseas Departments and Territories to benefit from specific aid and significant capital gains potential.
→ SCLScellier Law
Predecessor of Pinel, the Scellier scheme remains relevant for understanding the evolution of real estate tax deductions in overseas France.
→ DFLDuflot Law
The Duflot scheme preceded Pinel and offered similar conditions. A look back at this mechanism and its contributions to overseas real estate taxation.
→ 974New real estate in Réunion
Explore new housing offers on the island of Réunion via SeLoger Neuf. A dynamic market for your Pinel investment.
→Ready to invest in the French Overseas Territories?
Tax deductions up to 32%, superior rental yield, facilitated financing and the possibility of housing a loved one: all the advantages of Pinel Overseas await you. Explore our complete guides and articles.