Borloo
Tax allowances: everything you need to know about the Borloo legislation

Under the Borloo tax reduction legislation, you can deduct up to 65% of the property purchase price from your rental income over 9, 12 or 15 years.

Which types of property?

In order to benefit from the Borloo tax reduction legislation, your property must:
  • be located in France (mainland France of one of its overseas départements),
  • be new or purchased for future completion (VEFA),
  • have been purchased since 1 January 2006,
  • be let unfurnished for at least 9 years within 12 months of the date of completion of building works or the date of purchase.
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Which types of tenant?

In order for you to claim the tax benefits, your tenant:
  • must use the property as his/her principal residence,
  • must not be one of your direct family.
Your tenant’s income must fall below an upper limit calculated on the basis of:
  • the geographical zone in which the property is located,
  • his/her family situation (single person, dependant children, married couple, etc.).
The following table sets out the annual income limits for leases signed in 2006
Composition of the taxable household Location of the rented property
 Zone A
 Zone B
 Zone C
 Single person
 €32,268
 €24,939
 €21,822
Married couple
 €48,226
 €33,302
 €29,332
Single person or married couple with:
  
 1 dependant
 €57,971 €40,049
 €35,115
 2 dependants
 €69,440
 €48,347
 €42,497
 3 dependants
€82,204 €56,873
 €49,879
 4 dependants
€95,502 €64,093
 €56,264
 Unit increase per person for 5 dependants or more
 + €10,308 + €7,148
 + €6,389

Worth knowing: the tenant’s income is defined as that shown on his/her tax return for the period two years before the year in which the lease is signed! For example, leases signed in 2006 refer to taxable income for 2004, although the rental ceiling is that applying to the tenant’s family situation in 2006.
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How much should the rent be?

When setting the level of rent for your property, look at what is being charged by other landlords in the same market. Do bear in mind though that the rental amount must fall below the maximum set for the geographical zone in which the property is located.
The monthly rental is calculated exclusive of charges on the basis of usable floor area, i.e. the living area* plus half of all ancillary areas** up to a maximum of 8 m² (e.g. cellar, basement or balcony).

* Article R 111.2 of the French Code de la construction et de l’habitation (Building and Housing Code)
** See Article 1 of the French Decree of 9 May 1995


Maximum monthly rentals by zone for leases signed in 2006
Zone Location Maximum monthly rental per m²
A
  • Paris, the petite couronne and deuxième couronne up to the limits of the Paris conurbation
  • Côte d’Azur (the coastal strip between Hyères and Menton)
  • French Geneva
 €16.82
B1
  • Conurbations with populations of over 250,000
  • The grande couronne around Paris
  • Some conurbations with high living costs*
  • Around the Côte d’Azur
  • Overseas départements, Corsica and islands
 €11.69
B2
  • Other conurbations with populations of over 50,000
  • Other border or coastal areas with high living costs
  • Within the Ile-de-France
 €9.56
C
  • The rest of the country
 €7.01

* Annecy, Bayonne, Chambéry, Cluses, La Rochelle and Saint-Malo

Worth knowing : the maximum limit on allowable monthly rentals is raised on 1 January every year in line with the change in the Indice de Référence des Loyers (IRL) (Rental Reference Index) published by the INSEE (French National Institute for Statistics and Economic Studies).
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What are the tax allowances?

In addition to the allowances granted by the general tax regime, the Borloo legislation grants a 30% allowance on your taxable rental income. It also allows you to deduct up to 65% of the property purchase price (including legal fees) from your rental income, as follows:
  • 6% per year of the purchase price in the first 7 years, i.e. a 42% deduction over 7 years,
  • 4% per year for the next 2 years, i.e. a total of 8%,
  • an optional 2.5% per year over 6 years, applicable in 3-year blocks, i.e. 7.5% for 3 years or 15% for 6 years.
Calculate how much tax you could save under the Borloo legislation
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How do you claim them?

These tax allowances are not granted automatically. You must ask your Centre des Impôts (Tax Office) when you make your tax return for the year following completion of the building or your acquisition of the new property.
Please don’t hesitate to ask your Bouygues Immobilier advisor, who will help you complete all the necessary formalities.
Jean-Pierre Tougeron, Sales Manger in Nantes explains how it works
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