Tax reductions: yes, but which route to choose?
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How the Robien and Borloo tax reduction mechanisms work
Both these tax regimes allow you to deduct part of the cost of your new property investment from your gross rental income (the total rent you receive) over several years.
In addition to the property-related allowances granted under the general tax regime (loan interest, improvements, running costs, etc.) or the tax scheme applied, you can deduct the depreciation on the purchase price of your property investment (including legal costs).
The total amount of these deductions can result in a déficit foncier (property loss) which can be offset against your total taxable income, thus reducing the income tax you pay, within an annual limit of euros 10,700 for 2006 ! In return for these tax advantages, the rental must comply with certain conditions (maximum rent chargeable, tenant’s income, etc.) and letting periods.
In addition to the property-related allowances granted under the general tax regime (loan interest, improvements, running costs, etc.) or the tax scheme applied, you can deduct the depreciation on the purchase price of your property investment (including legal costs).
The total amount of these deductions can result in a déficit foncier (property loss) which can be offset against your total taxable income, thus reducing the income tax you pay, within an annual limit of euros 10,700 for 2006 ! In return for these tax advantages, the rental must comply with certain conditions (maximum rent chargeable, tenant’s income, etc.) and letting periods.
Robien or Borloo?
In practice, you have a choice of using the Robien scheme or the Borloo scheme.
Which route is right for you? Both these systems meet estate planning and financial objectives. They are complementary in nature, requiring a decision to be made on the basis of:
| Robien recentré scheme | Borloo scheme | |
| Depreciation | Up to 50% of the property purchase price (including legal fees): 6% in `the first 7 years and 4% in the following 2 years | Up to 65% of the property purchase price (including legal fees): 6% in the first 7 years, 4% in the following 2 years and 2.5% in the following 3 or 6 years |
| Other tax allowances | The general regime applied to income from property | The general regime applied to income from property + 30% allowance on taxable rental income |
| Duration | 9 years | 9, 12 or 15 years |
| Maximum déficit foncier | €10,700 per year | €10,700 per year |
| Rent | Market rate up to the maximum permitted monthly rent per m2 (excluding charges) fixed by law according to the zone in which the property is located: Zone A: €21.02 Zone B1: €14.61 Zone B2: €11.95 Zone C: €8.76 |
Market rate up to the maximum permitted monthly rent per m2 (excluding charges) fixed by law according to the zone in which the property is located: Zone A: €16.82 Zone B1: €11.69 Zone B2: €9.56 Zone C: €7.01 |
| Tenant | Maximum income limit according to family status. The property may not be rented to a relative of the owner. |
Maximum income limit according to family status. The property may not be rented to a relative of the owner. |
Which route is right for you? Both these systems meet estate planning and financial objectives. They are complementary in nature, requiring a decision to be made on the basis of:
- the zone in which your new Bouygues Immobilier house or apartment is located,
- the desired depreciation period,
- the prospective tenant.