Real Estate, Sofica, SMEs... An Overview of Tax Breaks

Investing money while taking advantage of tax breaks is a wise choice for investors. Real estate offers numerous tax advantages; income from real estate is subject to the progressive tax scale, which can reach 45% (excluding the exceptional contribution on high incomes), as well as social security contributions of 17.5%. Other tax breaks benefit investors who support small businesses or the film industry.

Pinel Program
The Pinel Program is intended for individuals who purchase a new or equivalent residence to be rented out unfurnished. In exchange, the investor must commit to renting out the property continuously for an initial period of six or nine years, which may be extended for one or two additional three-year periods. The property must be rented as a primary residence to a tenant—other than a member of the investor’s tax household—whose income does not exceed certain thresholds based on household composition and the property’s location. The rent must not exceed a maximum amount that also depends on the property’s location. Please note that this program expires at the end of 2024.

Denormandie Program
Modeled after the Pinel program, the Denormandie program offers the same tax reduction when purchasing an older home in need of renovation in a city designated as a “Coeur de ville” or one that has implemented a neighborhood revitalization initiative. The renovation work must be performed by an RGE-certified professional and account for at least 25% of the property’s price. Once the work is completed, the property must be rented unfurnished as a primary residence under the same conditions as those of the Pinel scheme. 

Malraux Program
The Malraux Program offers a tax deduction for investments in older properties located in certain designated preservation zones. This benefit is granted in exchange for the complete restoration of the property. Once the work is complete, the owner must commit to renting out the property for at least nine years. The Malraux tax credit is calculated based on the cost of the restoration work, up to a limit of 100,000 euros per year, for a maximum of four years. The rate depends on the location of the building.

Investing in SMEs
Investing in the equity of an unlisted SME entitles you to a tax credit, the rate of which depends on the date of your payments: 18% for investments made between January 1 and March 11, 2023, and 25% for those made from March 12 through the end of 2023. Payments are counted toward an annual limit of 50,000 euros for a single person or 100,000 euros for a married or civil union couple.

Sofica Shares Subscribing to Sofica shares entitles you to a tax reduction. In principle, there are three distinct tax reduction rates: 30%, 36%, and 48%. In practice, all approved Soficas have made a dual commitment, allowing subscribers to benefit from a tax reduction equal to 48% of the amount subscribed. Your contributions are subject to a dual cap of 25% of your total income and 18,000 euros. In return, you must hold your shares for at least five years.

Tax Incentive Cap The total tax savings resulting from the use of certain tax credits and deductions are limited to 10,000 euros per year. Tax deductions related to investments in overseas territories are subject to a specific cap of 18,000 euros. An additional cap of 8,000 euros (for a total cap of 18,000 euros) is granted to taxpayers who receive tax reductions for investments made in overseas territories and for subscribing to Sofica equity.