Scellier Schemes: Real Estate Investment to Reduce Taxes
The Scellier scheme, introduced in 2009 and replaced in 2013 by the Duflot scheme, was one of the most popular tax incentives to encourage investment in new rental properties. Although this scheme is no longer accessible for new investments, it remains relevant for understanding the evolution of tax policies in France and real estate investment strategies focused on tax reduction. This article explores the functioning of the Scellier scheme, its tax advantages, and its impact on the real estate market.
Origins and Objectives of the Scellier Scheme
The Scellier scheme was introduced in the 2009 finance law in response to the 2008 economic crisis. Its main objective was to support the construction of new housing in high-demand rental areas while offering individuals a way to reduce their income tax. The scheme also aimed to stimulate the construction sector during economic slowdowns.
Operation of the Scellier Scheme
The Scellier scheme allowed investors to benefit from a tax reduction in exchange for the purchase of a new or off-plan property intended for rental for a minimum of 9 years. The amount of the tax reduction was calculated based on the purchase price of the property, up to €300,000, and could reach:
- 25% of the purchase price for investments made between 2009 and 2010, with a maximum reduction of €75,000 over 9 years.
- 22% of the purchase price for investments made in 2011, with a maximum reduction of €66,000 over 9 years.
- 13% of the purchase price for investments made in 2012, with a maximum reduction of €39,000 over 9 years.
To benefit from the tax reduction, the property had to be rented at a capped rent, and the tenant's income had to stay below certain thresholds set according to the property's geographical area.
Impact of the Scellier Scheme on the Real Estate Market
The Scellier scheme had a significant impact on the real estate market, particularly by boosting the construction of new housing in high-demand areas. However, it was also criticized for sometimes encouraging construction in areas with insufficient rental demand, leading to difficulties in renting for some investors.
According to statistics, between 2009 and 2012, over 300,000 properties were built under the Scellier scheme, contributing to the revival of the construction sector in France. However, the end of the scheme gave way to more targeted schemes, such as Pinel, which introduced stricter criteria to prevent the abuses observed under Scellier.
Real-Life Examples
An investor who bought a new apartment for €200,000 in 2010 under the Scellier scheme could benefit from a €50,000 tax reduction over 9 years, approximately €5,555 per year. In return, they had to rent the property at a capped rent and comply with the tenant's income conditions.
Laws Encircling the Scellier Scheme
The Scellier scheme was governed by the General Tax Code, particularly articles 199 septvicies and following. These articles outlined the eligibility conditions, rent and income ceilings, and the tax reduction calculation methods.
Conclusion
The Scellier scheme played a significant role in promoting rental investment in France by offering significant tax advantages to individuals. Although no longer in force, it remains a key example of how tax policies can influence the real estate market. Current investors can learn from the successes and failures of Scellier to guide their choices towards more recent schemes, such as Pinel or Denormandie, which have taken over to encourage rental investment under more controlled conditions.
