Guide
How does the Girardin law work in the French Overseas departments?
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Written by: The Editorial Team
The principle of Girardin
The Girardin overseas tax exemption benefited French taxpayers, but the scheme will not last. It is only valid for building permits obtained until the end of 2012. The last beneficiaries of this scheme who made an investment Pinel Law Overseas will implement it at the end of 2015. It concerns the acquisition of new apartments or new houses in departments, such as the island of Reunion, and overseas regions. The Girardin Dom Tom real estate investment also refers to both free rental and that which operates under the intermediate mode.
Different reduction rates
The first type of scheme allowed a 2011 tax exemption equivalent to 40% of the property value, with a building permit (PC) obtained that year. The most significant savings were made under the intermediate mode; the 2011 Girardin overseas tax exemption gave the right to a tax reduction of 48% for a PC obtained in 2010. Subsequently, tax benefits became less favorable. The 2012 Girardin overseas scheme with a PC from that year only allowed 26% of the value of your apartment to be deducted. As we said in the first paragraph, PCs stopped being granted the following year, the 2013 Girardin law.
The ceilings in force
Two separate ceilings were established to frame the scheme. These are, on the one hand, the annual ceilings of tenant income. Girardin overseas investment in Guadeloupe or Reunion for example in 2015 requires the new owner to rent the apartment to a single person, if and only if they do not receive more than 31,661 euros in annual income. The limit was set for the same year at 58,555 euros for a couple. The Girardin law on overseas tax exemption also regulates the maximum amount of rents. In the overseas departments, the annual rent per square meter of living space was limited to 169 euros per square meter of living space. The ceiling is higher for a 2015 Girardin overseas investment in Polynesia and New Caledonia, since it was set at 209 euros.
The Pinel law in the overseas departments
You must necessarily consider the Pinel scheme if you are planning to invest in real estate in the overseas departments. A 2020 tax exemption with this tool commits you to renting the apartment for at least 6 years, whereas the minimum duration was only 5 years under the free Girardin scheme. Difference. The attractiveness of the two schemes is approximately the same, nevertheless it is possible to make greater savings by selecting one of the two schemes.
The tax deduction provided for by the Girardin overseas tax exemption law is calculated as follows. You must multiply the surface area of the real estate property by a base (2,645 euros including tax in the overseas departments), to which the percentages mentioned previously are applied. For an apartment of 40 square meters at a cost of 130,000 euros and a rental period of 6 years, this results in a tax reduction of: (40*2,645) X 0.26 = 27,508 euros The Girardin overseas tax exemption is slightly less advantageous than that offered by Pinel, which allows you to save 29,900 euros on your tax return (130,000 X 0.23).
Are you interested in an Overseas tax exemption following a future Overseas investment, but would you like to know more about new developments concerning real estate in Reunion? Contact our teams now, who will be able to inform you correctly.
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The editorial team
Passionate about overseas real estate, we follow daily the tax incentive schemes in the DOM-TOM. Our objective: to give you the keys to invest peacefully in Guadeloupe, Martinique, Reunion, Mayotte, French Guiana or Polynesia, with clear information and practical advice.
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