When the investments in real estate begin to go up again, especially in the sector of the new, everyone is talking about the Scellier law. What is this measure all about?
How to tell you this, the new law Scellier acts as a real detonator in the sector of the new. In fact the Law Scellier is an exceptional measure in favor of the investment in rental property which allows exempting from taxes in Scellier classic 25 % for 9 years and in "social" Scellier or "intermediary" until 37 % for 15 years!
How can you explain this success?
First of all, whereas previous tax exemption measures (Borloo, De Robien), Scellier law is very clear, understandable, and offers to potential investors, real and unquestionable advantages. In a few words, it represents a real progress with regard to the previous measures of tax exemption known.
Who is it for?
It’s for everybody, and more exactly for those who want to reduce their income taxes. It’s actually what makes its strength; in fact the law Scellier allows the small, average and big taxpayers to have a real estate property for almost nothing, which is a chance of a lifetime in the current economic context.
What are the concerned projects?
The investment has to concern a new accommodation, or in a future state of completion. Besides, the construction has to answer certain standards and precise technical regulation, in particular concerning the thermal regulations (RT 2000 for the projects benefiting from a building permit submitted before August 31st, 2006, and RT 2005 for the new projects benefiting from a building permit submitted later at this date).
When you say “nearly no costs”, what do you mean by that?
It’s simple: no need to have all the money to invest. You can make a minimum contribution and finance the rest of your acquisition by a bank loan (by taking advantage of very attractive rates at the moment). The monthly salary of the loan will be compensated on one hand with the rent, which will be paid by your tenant, and on the other hand by the tax reduction that you will benefit from your investment. In the end, it is possible that you have a monthly residual sum to pay, but this one will remain small.
Good. What are the obligations of the investors and what is the mechanism of the tax exemption in Law Scellier?
First of all the process of the tax exemption is applicable only under certain conditions: the investor has to make a commitment to rent his property in a main home for minimum 9 years, and not exceeding a ceiling of rent fixed by a decree (for example, for Côte d'Azur, this ceiling is fixed to 21.65 €/square meter for 2009). The commitment of rent must be signed in 12 months which follow the date of completion of the building. Finally a single accommodation a year is granted to the investors and the ceiling of the investment is set for 300.000 €.
An investor can exempt from taxation 25% of the amount of its purchase, paid off for a period of 9 years, on a new accommodation where the keys will be delivered in 2009 or before the end of year 2010. For example, for an investment of 200.000€, the total amount of the tax exemption is 50.000€, that is 5.555€ per year, during 9 years, for an investment of 300.000€, the total amount of the tax exemption is 75.000€, that is 8.333€ per year, during 9 years.
So in this last case, if I am taxable up to 8.000 € a year … ?
You will not pay income taxes in 2009 and you will benefit from a 333€ tax credit reportable the next year.
What is the expiry date of the Law Scellier?
2012, but the investments made in 2011 and 2012 will benefit only of 15 % of tax exemption (whereas 25 % for the investments made in 2009 and 2010), except in the programs called “BBC” (buildings low cost) which will continue to benefit of 25 % of tax exemption.
And the renting income?
They are added to your income tax, naturally. This being said you can deduct a part of the interests of the loans contracted for the purchase during the first 5 years (Law Sarkozy in 2007), as well as the amount of the insurances connected to the management of the property, the management fees are not supported by the tenant. Finally, within an investment in the new sector, you are exempted from the payment of the land tax during 2 years.
Can we rent the apartment to our children?
Yes as well as to our parents, from the moment when they are no longer connected with the household income of the beneficiary of the tax exemption.
Can we invest in a SCI (Real estate Civil Society)?
Yes as long as this one is not subjected to the company tax.
Can we buy a property in a joint ownership?
Yes and every part will benefit from the proportional tax reduction in its share in the joint ownership.
The Scellier law after 9 years?
You can if you opted for the tax exemption in classic Scellier to continue to rent your apartment (without any restriction of the renting price for a square meter), or to do whatever you want in case you want to occupy the place as a main or second home. You can also sale it with a substantial capital increase in value. If you chose the Social Scellier, you have the possibility, after these 9 years, to continue to rent your property and so exempt from taxation 2 % a year during two successive periods of 3 years.
What is “social” Scellier all about exactly?
With regard to classic Scellier, the option of Social Scellier allows you to exempt from taxation until additional 12 % over a period of twice three years (2 % a year) beyond the deadline of 9 years, what represents a total of tax exemption of 37 %. For example for an investment in social Scellier for a maximum amount of 300.000 €, the total amount of the tax reduction will be 111.000 € over 15 years. Besides, social Scellier also gives the right to a 30 % allowance on the received rents and when that comes to be added to the deduction of the totality of the interests of the loans and the fees of management, contributes to create a consequent land deficit.
What are the limits of social Scellier with regard to classic Scellier?
The renting income is lower because the prices in the square meter are lower than those of classic Scellier (for example on Côte d'Azur, the social Scellier limit is fixed at 17.33€/square meter, against 21.65€/square meter in classic Scellier), on the other hand, the income of your tenants does not have to exceed a certain limit (contrary to classic Scellier) that can be restrictive. Finally, within the social Scellier it is not possible to rent the apartment to relatives (contrary to classic Scellier).
Can we accumulate/add up the fiscal advantages during an investment in Law Scellier?
Within the same real estate investment, it is impossible to accumulate the fiscal advantages of the Law SCELLIER with the laws ROBIEN, BORLOO, ZRR, GIRARDIN, MALRAUX, MONUMENTS HISTORIQUES… On the other hand, the tax reduction Scellier is accumulative with others, benefiting also of fiscal advantages.
Can we make several investments in Scellier in the same fiscal year?
No, the tax reduction of the law Scellier is granted only for a single accommodation a year, over 2009, 2010, 2011 and 2012.
It indeed seems very interesting and marks a real evolution with regard to the previous known measures. However what are the traps or the errors to avoid?
I would say that it is necessary to use the law Scellier to optimize the profile of your real estate property. In that case the trap would be to invest on the basis of a virtual reality without good information on the area, without examining the description of the services with precaution, and without making sure of average prices of rent in the concerned area. In fact, beyond the tax exemption for 9 to 15 years, you will also watch to optimize your chances of resale with a capital increase in value. Never lose sight that your investment must be made with the biggest judgment and a medium and long-term vision, just like other real estate investment.
The law Scellier, a real opportunity?
With no doubt a revolution in the universe of the tax exemption and dynamite for your heritage!