Pinel law: how to exempt from tax the purchase of a new apartment?

The Pinel law is a tax exemption system like the Malraux law, on historical monuments or the Censi Bouvard law. It concerns all new homes purchased in France from 1er September 2014, and this, until December 31, 2021. It can be finished new properties, properties in VEFA or in a state of completion. Attention, the fact of building up a heritage must not exceed 300,000 euros per taxpayer, and this, for the same tax year.

How does this type of tax benefit work?

Whether buying a new apartment or a new house, the total value of the rental investment must not exceed 300,000 euros. The price ceiling is set at 5500 euros per square meter. This type of property is sold under the real property VAT regime at 20%, while real estate investment in an old property is subject to transfer duties at 5.80%. However, it is possible that old dwellings can benefit from a tax reduction provided that they are rebuilt as new.

As the Pinel system is centered on rental investments in new buildings, the properties must be rented as the tenant’s main residences for 6, 9 or 12 years. The rental must be done within one year, otherwise you must reimburse the tax authorities. It should be noted that to take advantage of these tax measures, you must rent to tenants whose income will not exceed a certain ceiling.

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It should be noted that thanks to the Pinel device, it is allowed to rent the property to one of your ascendants or your descendants, but on condition that it does not belong to your tax household.

What are the geographical areas concerned?

The reduction in income tax will apply to property located in municipalities affected by an imbalance between the demand for property and the actual supply. The zones are sectioned according to the number of inhabitants there are. We therefore identify:

  • Zone A Bis with Paris and some municipalities of the IDF;
  • Zone A in the Paris conurbation, the Côte d’Azur and French Geneva;
  • Zone B1 with agglomerations of more than 250,000 inhabitants, the outer ring around Paris, Corsica.

For purchases made in 2018 in zone B2, where the houses must be located in an area of ​​more than 50,000 inhabitants, or other border areas with France, the tax advantage will be retained for investments whose building permits have been granted. validated before the end of 2018.

The tax reduction that will actually apply

The owner undertakes to rent his property, but within the limit of a period established in advance in order to benefit from the land deficit. While the Duflot Law only proposed a period of nine years for a tax exemption rate of 18%, the Pinel Law offers three different years at the option of the investor.

  • You rent for 6 years: the tax advantage is 12% of the value of the property, within the limit of the double ceiling of 5,500 euros per square meter and 300,000 euros. The value of the tax deduction reaches a maximum of 36,000 euros;
  • You rent nine years: you will reduce 18% of the price of your taxes or 6,000 euros per year for 9 years or 54,000 euros;
  • You rent for 12 years: the tax advantage on rental income is 21% of the price of the accommodation. During the first 9 years, the discount can reach 2% per year or 6,000 euros for a total of 54,000 euros. The last 3 years, this rate will be 1% per year or 3000 euros if we focus on an investment value of 300,000 euros. The tax benefit is 63,000 euros.
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What about the rent ceiling for the year 2020?

In zone A Bis, the monthly rent ceiling in euros and per square meter is 17.43 euros; in zone A, it is 12.95 euros; in zone B1, we have 10.44 euros and finally in zone B2, we have 9.07 euros. Tenants must not exceed a certain overall reference income depending on the composition of the household.

To benefit from the advantages of the Pinel system, the investor must, when declaring his taxes, complete form 2044-EB and join it to the declaration of income. This will show the tax authorities that you have indeed purchased a property according to the Pinel system. Will be indicated: the identity of the buyer and his address, the date of acquisition or the date of completion of the property, the living area, the date of the first rental, the value and the calculation of the deduction of taxes or even the commitment to rent the property as a principal residence.

Direct investment or through an SCPI?

The SCPI or Civil Real Estate Investment Companies are a long-term rental investment allowing an inexpensive investment. The SCPI will give potential income to its partners in line with the rents received in proportion to what will actually be invested. This is interesting for small taxpayers who want to benefit from a secure investment over the long term or taxpayers who want an optimized return. Please note that the capital is not guaranteed on resale.

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In any case, both systems work perfectly. It is possible to invest directly or through an SCPI, and you will enjoy the same advantages in terms of taxation. If you are forced to pay real estate wealth tax, the shares of SCPIs, OPCIs or land shares must be seen on the tax return.

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Read also: Investment in SCPI, for whom?

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