French General Tax Code
In forceI. - Taxpayers domiciled in France for tax purposes within the meaning of l'article 4 B who acquire a home used as their main residence, either directly or through a company not subject to corporation tax that makes it available to them free of charge, are eligible for an income tax credit in respect of interest on loans taken out with a financial institution in respect of this transaction, as defined in Article L. 312-2 of the French Consumer Code.
The first paragraph also applies to taxpayers who have a home built that is intended to be used as their main home from the time it is completed. In this situation, the loans referred to in the first paragraph are those taken out to finance the acquisition of the land and the building expenses.
The dwelling must, on the day it is allocated for use as the main residence of the beneficiary of the tax credit, meet the minimum surface area and habitability standards mentioned in Article 244 quater J. In addition, the home acquired new, in a future state of completion or that the taxpayer has built must have thermal characteristics and energy performance achieving the minimum results defined in application of articles L. 171-1 and L. 172-1 of the French Construction and Housing Code. The taxpayer must provide proof of compliance with this last condition in accordance with the procedures defined by decree.
II. - I does not apply to interest on loans allocated:
1° To repay all or part of other loans or overdrafts. However, interest on loans taken out to replace the loans mentioned in I or to repay these loans is eligible for the tax credit, up to the limit of the interest appearing on the schedules of the initial loans and those of the annual instalments mentioned in III still to run;
2° For the acquisition of a home through a company not subject to corporation tax, when this home previously belonged to the taxpayer directly or through a company not subject to corporation tax.
III. - The interest paid in respect of the first five annual repayments of the loans referred to in I, excluding borrowing costs and insurance contributions taken out to guarantee repayment of the loans, is eligible for the tax credit.
When the loans are granted to a company not subject to corporation tax of which the taxpayer is a member and which makes available free of charge to the taxpayer a building or part of a building belonging to the taxpayer and which the taxpayer uses as his or her principal residence, the interest paid is taken into account in proportion to the taxpayer's share of the rights in the company corresponding to the housing concerned.
Par dérogation aux dispositions du premier alinéa, lorsque le contribuable acquiert ou fait construire un logement neuf dont le niveau élevé de performance énergétique globale, déterminé dans des conditions fixées par décret et justifié par le bénéficiaire, est supérieur à celui qu'impose la législation en vigueur, les intérêts ouvrant droit au crédit d'impôt sont ceux payés au titre des sept premières annuités.
IV. - The amount of interest referred to in III giving entitlement to the tax credit may not exceed, for each tax year, the sum of €3,750 for a single, widowed or divorced person and €7,500 for a couple subject to joint taxation. This sum is increased each year by €500 for each dependant within the meaning of articles 196 to 196 bis. The sum of 500 € is halved in the case of a child deemed to be equally dependent on both parents.
The amounts of 3,750 € and 7,500 € are respectively increased to 7,500 € for a single, widowed or divorced disabled person and 15,000 € for a couple subject to joint taxation when one of their members is disabled.
V. - The tax credit is equal to 20% of the amount of interest mentioned in III, up to the limit mentioned in IV.
This rate is increased to 40% for interest paid in respect of the first annual repayment.
However, for housing acquired new, in a future state of completion or that the taxpayer has built:
1° When the acquisition or construction relates to housing mentioned in the last paragraph of III, the rate mentioned in the first paragraph of this V is increased to 40%;
2° When the acquisition or construction relates to housing other than that mentioned in 1°, the rates mentioned in the first and second paragraphs are respectively reduced to:
- 15% and 30% for housing acquired or built in 2010;
- 10% and 25% for housing acquired or built in 2011.
VI. - I applies on condition that the dwelling that is the subject of the loan is, on the date the interest is paid, allocated for use as the taxpayer's principal residence.
However, I also applies to interest paid before the completion of the dwelling that the taxpayer has built or acquires in the future state of completion, where the taxpayer undertakes to allocate this dwelling to his principal residence by 31 December of the second year following that of the conclusion of the loan contract at the latest.
When this commitment is not honoured, the tax credit obtained by the taxpayer is subject to a reversal in respect of the year during which the commitment was not honoured and no later than the second year following that in which the loan agreement was entered into. Where applicable, the penalties provided for in Article 1729 shall be applied.
I also applies to interest paid by a taxpayer who, as a result of a professional transfer, is no longer able to allocate the dwelling that is the subject of the loan to his principal dwelling, provided that this dwelling is not let and that the taxpayer has not acquired a new dwelling allocated to his principal dwelling or intended for this purpose.
The date from which the first five or seven annual instalments referred to in III are deducted is the date on which the borrowed funds are first made available. However, in the case of construction or acquisition in the future state of completion, this date may be set, at the taxpayer's request, at the date of completion or delivery of the property. This request, which is irrevocable and excludes the application of the second and third paragraphs, must be made at the latest when the tax return for the year in which the completion or delivery of the property takes place is filed.
VII. - The tax credit referred to in I is deducted from income tax after deducting the tax reductions referred to in articles 199 quater B to 200 bis and 200 decies A, tax credits and non-liberating levies or deductions. If it exceeds the tax due, the excess is refunded.
VIII. - I applies to interest on loans taken out in a Member State of the European Union or in another State party to the Agreement on the European Economic Area which has signed an administrative assistance agreement with France to combat tax evasion and avoidance, and which comply with equivalent regulations.
IX. - The provisions of this article are exclusive of those mentioned in a of 2 of Article 199 undecies A.
X. - This article applies to transactions for which each of the loans contributing to their financing was the subject of a loan offer issued before 1 January 2011, provided that the acquisition of the completed home or home in a future state of completion occurs no later than 30 September 2011 or, in the case of housing construction transactions, that the declaration of commencement of construction occurs no later than the same date.
