Pinel Law Overseas Departments and Territories | What tax deductions when investing?

What is the Pinel law?

The Pinel Law for Overseas Departments and Territories (also called Pinel Law Overseas) has several advantages that have attracted many French taxpayers since its establishment in September 2014. This scheme replaced the Duflot system, which had itself succeeded the Scellier law. We speak of Pinel Overseas tax relief because a real estate investment made in an Overseas Department gives the right to a significant tax reduction. The tax benefit in effect with this scheme depends on the duration of rental commitment and the living space of the property.

The different tax relief rates

The Pinel law for Overseas Departments and Territories stipulates that a taxpayer who purchases a new apartment under the Tropics (for example in Guadeloupe) enjoys a tax reduction rate of 23% of the real estate value for a 6-year rental commitment, or a reduction rate of 29% for a 9-year rental commitment. The savings are even more substantial in the context of extending the rental period by 3 years after a period of 9 years.

The individual investor then benefits from an attractive reduction rate of 32%. The Pinel Overseas scheme is easily understandable for people with no expertise in real estate or financial matters. It thus distinguishes itself from stock market investments which are more difficult to understand.

The evolution of different tax relief schemes

Quality Pinel law 2021 also offers the opportunity for an individual to significantly reduce their taxes. The 2015 Overseas investment corresponds to the scheme in force today while the 2013 Overseas investment refers to the Duflot law which had slightly less advantageous provisions. The Pinel Overseas law allows a tax reduction of 32% of the property value for a 12-year rental commitment.

This Overseas rental investment has an increased tax deduction of 11 percentage points compared to a real estate investment in mainland France. People who only wish to rent their apartment for 6 years (minimum duration) benefit from a tax reduction of 23% for their real estate investment in Overseas Departments and Territories. Nevertheless, care must be taken to comply with the tax shelter cap for an investment in Overseas departments and regions.

Tax reductions when investing in Overseas Departments and Territories

The purchase of a studio of 35 square meters for 170,000 euros allows the investor to deduct 54,400 euros from taxes. They are entitled to proceed with this operation if they commit to renting the property for 12 years (32% tax relief). Overseas real estate investment allows a tax deduction of 4,533 euros over 12 years. The legislator set a double ceiling for this type of investment. This is firstly a ceiling on the overall amount of 300,000 euros. On the other hand, the tax advantage concerns the price per square meter for an Overseas real estate investment. It was set at 5,500 euros. The 2013 Overseas investment benefited many French people, the terms of an investment in 2021 may allow you to realize your dreams.

Capped rents

The resources of tenants must be taken into account in this type of Overseas real estate investment. A single person in French Polynesia must receive a maximum of 29,751 euros per year to be entitled to occupy the apartment acquired with the Pinel scheme, for what is called a good Overseas rental investment. To rent a large property as part of an Overseas real estate investment, the new owner must rent it to a household of 3 or 4 people (including 2 children) who receive a maximum of 78,550 euros in annual income.

A tax reduction varying according to the rental duration

The rental duration determines the tax reduction rate for this real estate investment in Overseas Departments and Territories. Dom Tom real estate investment in Réunion or another territory allows you to deduct up to 32% of the value of the acquired property as we mentioned previously. The reduction is less advantageous when the housing is rented for 6 years, it amounts to only 23%. As a tax loophole, Dom Tom investment is still highly sought after by taxpayers aiming to invest their savings intelligently.

Buy a new real estate property with the Pinel tax scheme: the example of Réunion

The terms of the Pinel scheme on the island of Réunion

The Pinel Law Overseas on the island of Réunion defines the regulatory framework for real estate investments made in this overseas department and region. You can use this advantageous scheme to become the owner of an apartment or house in the Tropics while reducing your taxes for several years. The Pinel Law Réunion concerns real estate properties respecting the thermal characteristics of RT 2012. You are consequently investing in a low-energy building that remains attractive to people looking for a rental on this island. You can use the Pinel Law Réunion to deduct several thousand euros of taxes per year.

Simulation of a real estate investment in Saint-Denis (974)

Three reduction rates are offered to taxpayers planning to invest with Pinel on the island of Réunion. They amount to 23%, 29% and 32% for respective rental commitments of 6 years, 9 years and 12 years. A new housing with a value of 120,000 euros catches your attention in Saint-Denis and you plan to rent it for 9 years starting from your purchase in 2020. You then benefit from a tax reduction of 34,800 euros (120,000 X 0.29) in total with the Pinel Law Réunion. This corresponds to approximately 3,866 euros of savings once per year until 2029 inclusive. You thus grasp the full potential of this tax exemption scheme in Overseas.

You can also find information about the Scellier, Duflot laws as well as the Pinel Dom-Tom law on our site.

The principle of the Pinel scheme in the French Overseas Territories