II: Income tax

1. An income tax reduction is introduced for taxpayers domiciled in France within the meaning of Article 4 B who carry out reconstruction, extension, repair or improvement work between 1 January 2005 and 31 December 2012. This tax reduction applies:

a) To expenditure relating to a dwelling, forming part of a tourist residence classified in a rural regeneration area or in an area, other than a 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 of more than 5,000 inhabitants, which is intended for rental, the income from which is taxed in the property income category ;

b) Expenditure relating to a dwelling, completed at least fifteen years ago and located in an area mentioned in a, which is intended for rental as a furnished tourist property within the meaning of the decree of 28 December 1976;

c) Expenditure relating to a dwelling, completed at least fifteen years ago and forming part of a classified residential tourist village included within the perimeter of a leisure property rehabilitation operation defined in Article L. 318-5 of the town planning code, which is intended for rental, the proceeds of which are taxed in the property income category.

For the dwellings referred to in a and c, the indexation of a minority share of the rent to turnover does not prevent taxation in the property income category.

2. The tax reduction is granted in respect of the year in which the work expenditure is paid. The provisions of 5 of I of Article 197 are applicable.

3. The amount of expenditure on reconstruction, enlargement, repairs or improvements actually borne by the owner entitling him or her to the tax reduction may not exceed, in respect of any one year, €50,000 for a single, widowed or divorced person and €100,000 for a married couple. Its rate is equal to:

a) 15% of the amount of expenditure relating to housing mentioned in a and b of 1;

b) 30% of the amount of expenditure relating to housing mentioned in c of 1, without, however, having to be reduced by public subsidies granted to taxpayers.

4. For the accommodation referred to in a and c of 1, the owner must, depending on the case, undertake to rent it bare for at least nine years to the operator of the tourist residence or classified residential tourist village. The lease must take effect within one month of completion of the works. The payment of part of the rent by offsetting against the price of accommodation services invoiced by the operator of the residence or residential village to the owner, when the accommodation is made available to the latter 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.

For the accommodation referred to in b of 1, the owner must undertake to let it furnished to individuals for a minimum of twelve weeks per year for the nine years following the year in which the work is completed.

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, the tax reduction is reversed for one-third of its amount in respect of the year in which the rental commitment is broken and each of the following two years. However, in the event of disability corresponding to classification in the second or third of the categories provided for in article L. 341-4 of the Social Security Code, redundancy or death of the taxpayer or one of the spouses subject to joint taxation, the tax reduction is not taken back.

The reduction applied is not taken back if the co-owners replace the defaulting manager of the tourist residence with one or more companies that provide the same services over the remaining rental period in accordance with legal requirements, under conditions set by decree. This option is open to them if another manager's application has not been successful after a period of one year and they own at least 50% of the flats in the residence.

5. The tax reduction does not apply to homes where ownership is divided. Taxpayers who apply for the tax reduction waive the right to deduct these expenses, either in their actual amount or in the form of a depreciation allowance, for the purposes of calculating categorical income. He may not benefit from the provisions set out in Article 32 or in l'article 50-0.