French General Tax Code
In forceAny taxpayer who, between 1 January 1999 and 31 December 2010, acquires a new dwelling or a dwelling in a future state of completion forming part of a classified tourist residence in a rural revitalisation zone and who intends to rent it out, the proceeds of which are taxed in the land income category, benefits from an income tax reduction. The fact that a minority of the rent is indexed to turnover does not prevent the property from being taxed as income from land.
This tax reduction is calculated on the cost price of these properties up to a limit of €50,000 for a single, widowed or divorced person and €100,000 for a married couple. The rate is 25%. Only one tax reduction can be claimed at a time, and it is spread over a maximum of six years. It is granted in respect of the year of completion of the home or its acquisition if later and deducted from the tax due in respect of that same year at the rate of one-sixth of the €12,500 or €25,000 limits and then, where applicable, for the balance over the following five years under the same conditions.At the taxpayer's request, this balance may be deducted by one-sixth over the following six years.
Also eligible for the tax reduction, under the same conditions, are dwellings forming part of a classified tourist residence in an area, other than the aforementioned rural regeneration area, included on the list for France of areas concerned by Objective 2 provided for in Article 4 of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds, excluding municipalities located in conurbations with more than 5,000 inhabitants.
Also eligible for the tax reduction, under the same conditions, are dwellings forming part of a classified tourist residence located within the area of intervention of a public body responsible for the development of a new conurbation created in application of the loi n° 70-610 du 10 juillet 1970 tendant à faciliter la création d'agglomérations nouvelles.
The owner must undertake to rent the property free of charge for at least nine years to the operator of the tourist residence. The lease must take effect within one month of the date of completion of the building or its acquisition, whichever is later. Once the local authority and the local government have identified a shortage of accommodation for seasonal workers in the resort, the operator of the tourist residence must undertake to reserve a significant proportion of its property stock for the accommodation of seasonal workers, a proportion at least equivalent to the number of employees in the residence. If the property is sold, the reduction applied is reversed in the year of sale. If the rental commitment is broken for a period of more than twelve months in the event of the operator's compulsory liquidation, termination or assignment of the commercial lease by the operator, or if the owners take advantage of the contractual clause providing for termination of the contract if the operator fails to pay the rent, one third of the tax reduction applied is reversed for the year in which the rental commitment is broken and for each of the following two years. The reduction applied is not reversed if the co-owners replace the defaulting manager of the tourist residence with one or more companies that provide the same services for the remaining rental period in accordance with legal requirements, under conditions laid down by decree. This option is available to them if another manager is unsuccessful after a period of one year and they own at least 50% of the flats in the residence. The payment of part of the rent by offsetting against the price of accommodation services invoiced by the operator to the owner, when the accommodation is made available to the owner for a total period not exceeding eight weeks per year, does not preclude the benefit of the reduction provided that the gross property income declared by the lessor corresponds to the annual rent normally payable by the operator in the absence of any occupation by the owner.
The provisions of 5 of I of Article 197 are applicable.
The reduction is not applicable in respect of housing where the right of ownership is dismembered. However, where the transfer of ownership of the property or the dismemberment of this right is the result of the death of one of the spouses subject to joint taxation, the surviving spouse who is the beneficiary of the property or the holder of its usufruct may request that the benefit of the reduction provided for in this article be reinstated in his or her favour, under the same conditions and according to the same procedures, for the period remaining at the date of death.
