French Buy to Let Property Guide

2. Buy to Let Income Tax Reduction

The level of the reduction in income tax will depend on the year of acquisition of the property, and the controls the landlord is prepared to accept on the income of the tenant and level of the rent.

A basic reduction of 25% applies to those properties purchased in 2010, reducing to 13.5% in 2011, to 9% for a property purchased in 2012, unless the property is constructed to low energy consumption standards (see below).

The price basis on which the tax break can be granted cannot exceed €300,000, so for 2010 the maximum reduction in income tax is €75,000.

The reduction in income tax is available for nine years, which means that for a property purchased in 2010 the maximum reduction in income tax per year is €8,333.

Where you are unable to make use of all of the reduction in tax in a single year, then any surplus can be rolled over for the subsequent six years, thereby making the income tax relief available for up to 15 years.

Thus, an investor who has a right to a reduction in tax of €3000 in a year, but who only has a liability of €2000 in that year, can roll over the surplus €1000 to the following year, and so on.

NB: With effect from 2011 in order to maximise the tax benefit under the Scellier scheme the property will need to comply with the low energy consumption standard known as Batiment Basse Consommation (BBC).

If the development does not comply, the reduction in income tax in 2011 is 13.5%, falling to 9% in 2012.

However, provided the development meets the BBC standard, then the tax reduction is 20% in 2011, reducing to 18% in 2012.

For properties purchased from 2013, then further advice will be provided nearer this date.

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