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Tax optimization tools: The Land Deficit system

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How the device works

1. SIMPLE

  • Common law regime not subject to the capping of tax loopholes

  • For any customer with land profits

 

2. EFFICIENT

  • Double tax impact on TMI + social security contributions (CSG / CRDS)

    • Uncapped deduction of maintenance, repair and improvement work from property profits

    • Deduction of land deficit from overall income within the limit of €10,700 per year

    • Carryover of the DF surplus over the following 10 years

  • Loan interest and similar costs deductible from property income

  • Rental of unfurnished property for 3 years

  • Immediate and powerful tax impact of up to 53% of the investment amount

 

3. ACCESSIBLE

  • Total price from €110,000 in cities like Marseille, Tours, Nîmes, Bayonne, Metz, Toulon...

 


Withholding tax (PAS)

According to the PAS systems, it is possible to obtain 150% deduction of work expenses if:

  • A work expense incurred in 2024 will be deducted 100% from 2024 land income and 50% from 2025 land income, which gives an effect of 150%

  • A works expense paid in 2025 will be deducted at 50% from 2025 property income

 

These imputation rules do not apply :

  • to acquisitions made from January 1, 2025

  • for so-called emergency work

 

So-called non-controllable charges (taxes, insurance, loan interest, etc.) will be deductible in 2024 from the moment they become due.


To know

Work paid in 2024 benefits from a “ 150% effect ”. This transitional measure is an economic incentive aimed at maintaining the activity of the building trades and work orders in 2024.


A double opportunity to support a work load in 2024

  1. The opportunity to create, in 2024, a land deficit carry forward.

    1. Even though ordinary 2024 property income will not be taxed, it is appropriate, with regard to the rules of the SAS and the carryover of Land Deficit (1 • paragraph of 3 of I of article 156 of the CGI) to create during the year 2024 a deficit carried forward to land income for the following 10 years .

  2. The opportunity to preserve, in 2024, an existing deficit carryover.

    1. A works expense incurred in 2024 is intended to preserve existing old loss carryforwards. To avoid the automatic and therefore confiscatory imputation of the existing deficit carryover to the 2024 property income, the taxpayer must bear, in 2024, a work expense at least equal to the declared property income .


 

Example: The certain efficiency of the 150% effect and the creation in 2024 of a carry-forward deficit

Customer profile:

  • Recurring property income of the investor: €20,000

  • Rental real estate investment of €200,000 made in 2024 including €150,000 of work

 

Recommendation :

Diagram on the recommendation for payment of 100% of the works budget in 2024

 

HERITAGE STRATEGY

  • Pay a works expense in 2024 rather than 2025

  • To optimize the 150% effect, pay in 2024 an amount of work ≥ 2 x (2024 land income + €10,700)

  • Pay a works expense in 2024 to preserve an existing deficit carryover

 


If you have any questions regarding the specifics of the system, do not hesitate to contact us at amm@capitalconseils.net .

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