Tax credits for renovation work in France
PUBLISHED: 16:35 22 October 2015 | UPDATED: 12:15 20 April 2016
Tax credits are available for renovation projects in France, particularly for making a property more energy efficient. Tax expert Rob Kay explains what's available and how credits are applied
Tax credit for making a property energy efficient
There is indeed a tax credit currently available in France for equipment bought and installed to make a house more energy efficient. Previously called the ‘credit for sustainable development’, it is now an energy transition tax credit and is available for equipment such as power generation using renewable energy, boiler equipment, central heating, insulation, etc. It only applies to work done on a main home, and which is at least two years old. The equipment must be supplied and installed by a professional.
This credit was simplified under a law which came into effect this year, so that now there is a single tax credit of 30% on eligible expenses made between 1 September 2014 and 31 December 2015. We do not yet know what will happen next year. It’s important to note that there is a ceiling for this tax credit, which is €8,000 for a single taxpayer and €16,000 for a couple, with €400 added for any dependant.
Tax credit for elderly and disabled people
There is another tax credit which is also available for equipment and home adaptations to help the elderly and disabled. It applies whether you own or rent the property as your main home, even if you occupy it without paying any rent. Do take note, though, that the granting of the credit is not conditional on the presence of an elderly or disabled person in the property. The credit is 25%, but again there are limits.
Tax credit for properties that are leased
Under legislation called Pinel’s Law, a tax credit is available for investments in French property when the property is let for set periods of time. A tax credit of between 12% and 21% of the purchase price of a green property is available, depending on how long the lease is (minimum six years). There are limits and conditions.
Reduced VAT on building works
Building works can also benefit from the 5.5% reduced rate of VAT (compared to the standard rate of 20%). This applies for certain works of energy conservation carried out on a residential property which is a main or second home. The kind of things that qualify for the reduced rate are condensing boiler, heat pump, thermal insulation, heating control unit, renewable energy production equipment, etc. Furthermore, the 10% rate of VAT may apply on improvements and maintenance works of residential properties. In both cases you need to have owned the property for two years before the works start, and the work must be provided and invoiced by a builder.
How are they applied?
Tax credits in France are deductible against the actual tax payable, rather than against the gross or net income. Currently, the maximum total reduction that can be received is €10,000 of the global net taxable income of the household, though some credits are excluded from this calculation.
There is an annual local property tax in France called taxe foncière, which is paid by the owner of a property. New buildings and renovated properties used as the main home are exempt from this tax for the first two years after construction. Renovated properties can benefit provided that reconstruction or additional construction work has been carried out, and is determined according to the nature and size of the work.
Local authorities have the power to grant taxe foncière temporary exemption for low energy consumption buildings – in this case, 50% or 100% of the tax can be offset.