The Pinel Law is a device that aims to reduce the tax rate on a real estate investment. It was introduced in early September 2014 by Sylvia Pinel. This law was established for French people who wanted to invest in a new home. In addition, it also aims to encourage rental investment with the aim of boosting residential home construction. So, without further ado, let’s dive into this blog and learn more about the Pinel law in France.
The principle of the Pinel law
The purpose of this law is to reduce the tax on rental property investment. This reduction represents 12% of the cost of a home that you rent for 6 years. This tax bonus rises to 18% if you extend your rental contract to 9 years and becomes 21% of the rent for a 12-year contract. However, this bonus is limited to 6 to 12 years of real estate rental in the new.
The amount offered by this device is, however, capped within the limit of 5,500 euros / m² and does not exceed 300,000 euros. Note that this scheme is valid, for the moment, until December 31, 2022. Under current French financial legislation, these percentages will be reduced in 2023 and 2024.
The 12% will be reduced to 10.5% and then to 9%, the 18% will be reduced to 15% and then to 12% in 2024, and the 21% will be reduced to 17.5% in 2022 and to 14% in 2023. Unlike the previous real estate tax reduction scheme, the Duflot, you can still benefit from this tax reduction even if you rent a house to one of your family members. The Pinel law is valid as soon as the property is occupied.
The advantages of the Pinel law
The main advantage of the Pinel law is that it is available for various rental periods, namely 6 years, 9 years, and 12 years with various tax reduction rates, respectively 12%, 18%, and 21%. The Duflot, on the other hand, offers only one tax exemption rate of 18% and for only one duration, 9 years.
Thus, you benefit from a tax reduction of 63,000 euros within 12 years. Moreover, when you invest in the Pinel law, it is easy to rent, thanks to the establishment of a ceiling for rent. Similarly, you will be able to sell housing easily, benefiting from the Pinel device.
The conditions to be eligible for the Pinel law
In order to benefit from the Pinel law, you must respect various conditions. In the case of a rental investment, the property must be new and rented empty. This means that any rental with furniture is not eligible for this reduction. It must also meet the BBC or RT 2012 standard. Otherwise, rehabilitated housing can also benefit from its derogation. Then, the property is located in areas where the Pinel scheme is available. In addition, the rental contract duration is a minimum of 6 years and a maximum of 12 years.
The main beneficiaries of the Pinel law
The Pinel law is aimed at different types of real estate investors, including those who are able to take out loans. Owners of their main residence can also benefit from this scheme. Apart from that, it is also made for tenants in their thirties, forties, and fifties. This law is also intended for families whose real estate taxes are between 4,500 and 16,000 euros per month. The objective is to increase the real estate assets by reducing the tax rate on them.
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