The big cities of France being in shortage of housing, the government encourages investors to turn to rental real estate. The Pinel system then allows French taxpayers to reduce their taxable income in order to reduce their IR, if they acquire rental property located in an area where rental demand is strong.
In order to reduce your IR through the Pinel system, you must agree to rent your property for a minimum period of 6 years. You then have the possibility of renewing your commitment twice on a three-year basis, ie to rent your property for a total period of 9 or 12 years.
The tax exemption allowed by the Pinel system is then calculated according to the duration of the rental. Indeed, you can charge 2% of the total amount of your investment per year to your overall income, for 6 or 9 years. Then, between the tenth and twelfth year of rental, you can reduce your income by 1% per year.
Thus, you can reduce your taxes:
However, it remains to be noted that this tax advantage is subject to the cap on tax loopholes, set at €10,000 per year in 2015.
The tax exemption calculation is based on a total amount of investment that cannot exceed €300,000 excluding VAT. In addition, the Pinel law imposes an additional limit: the price per square meter of living space (therefore excluding ancillary areas such as garage or terrace) cannot exceed €5,500.
The cost price then includes two elements:
The purchase price of the property and ancillary areas if they are also offered for rental under a single lease;
Costs related to the acquisition of housing, such as: notary fees, agency fees, commissions paid to intermediaries, VAT, etc.