What do you want to know?
Why invest in forest group shares or acquire timber & forests ?
Concerning the acquisition of woods & forests:
This involves acquiring wood or a private forest directly and managing its wooded area yourself (afforestation, development and maintenance).
The owner of a forest is likely to receive different revenues:
sale of cups,
sale of processed wood (sawing, shaping, etc.),
sale of other products (resin, bark, mushrooms, etc.),
hunting rights.
Regarding GFF shares:
Forest Groups are special civil societies whose exclusive purpose is the constitution, improvement, equipment, conservation of one or more forest stands, as well as the acquisition of forests or land to be afforested.
Groupements Forestiers d'Investissement (GFI) are forest groups that are authorized to make a public offer of their shares.
It is possible to subscribe or acquire shares in forestry groups:
during the creation of a forestry group or during a capital increase,
in the secondary market.
The establishment of a sustainable management document will allow the owner to properly manage his forest heritage and obtain various tax advantages.
The first tax advantage offered by investing in a forestry group or acquiring wood & forests is a reduction in income tax.
This reduction amounts to 18% of the amount invested. The investment in GF offers an IFI (Immobilière fortune tax) allowance of 75% on the market value of the shares of forest groups held (Excluding cash).
Finally, the purchase of forest group shares finally offers a reduction of 75% on the transfer, only on the market value of the forest held by the GF (excluding subscription fees and cash).
Forest investment: Tax exemption, transmission & Diversification of heritage
What is forest investment and forest group shares ?
Investing in forests is almost a French tradition. Many families have very small plots resulting from inheritance. From generation to generation, the plots divide and become too small to be properly exploited by their owners.
Investors are looking for: a stable, sustainable, diversifying investment and a little tax exemption. The yield is low, even if it is based on the wood market which has been growing steadily for several years. The storms, of the type of that of 1999, did not impact the constant increase in demand and prices.
Halfway between real estate and financial heritage, this category of investment occupies a special place in the overall heritage.
There are several ways to invest in a wood or a forest. Like real estate that you can own directly or through a civil society (SCI, SCPI), it is quite conceivable today to own part or all of a timber, alone or associated with other individuals.
There are several positive aspects to investing in a forest, in particular the security aspect of the investment that it provides.
As in any investment, a forest area has an evolutionary value. This is linked to the supply and demand for this specific land.
Finally, to invest in the timber sector, two types of groups exist, with different legal foundations: Groupements Fonciers Forestiers (GFF) and Groupements Forestiers d'Investissement (GFI).
Investment period
Investing in woods and forests is a long-term investment:
the profitability of forest stands is linked to their biological increase,
a certain time is necessary for the group to be able to absorb the costs of acquiring its forest heritage,
the secondary market is illiquid.
The benefit of certain tax advantages requires long-term commitments:
Tax reduction on acquisition Retention commitment for 15 years from acquisition
Tax credit
Forestry work: Conservation commitment until December 31 of the 8th year following completion of the work
IFI exemption
Commitment to apply the sustainable management guarantee for 30 years
DMTG exemption
Commitment to apply the sustainable management guarantee for 30 years
IFI & GF Taxes
The capital gain tax is reduced by an allowance of € 10 per year of ownership and per hectare sold.
Timber and forests benefit from an IFI exemption up to ¾ of their value (75%).
In other words, they are included in the basis of the IFI only up to a quarter of their value (25%).
Timber and forests benefit from exemption from free transfer rights up to ¾ of their value (75%).
In other words, they are only taxed up to a quarter of their value (25%).
Woods and forests are exempt from property tax up to 20%.
The exemption can be total under certain conditions.
Taxation of forestry investment
The investor can benefit from a tax reduction equal to 18% of the subscription or acquisition price of the units, withheld within the limit of € 5,700 for a single person or € 11,400 for a couple, i.e. tax reduction of € 1,026 for a single person and € 2,052 for a couple.
Several IR credits or reductions depending on the operations carried out by the forestry group
Tax reduction equal to 25% in the event of payments between May 9 and December 31, 2022 for the subscription to the initial capital or to a capital increase of an operational group (payments withheld within the limit of € 50,000 for a single person or € 100,000 for a couple subject to joint taxation). For more information about this reduction see our Customer Strategy
Tax credit for forestry work equal to 18% of the fraction of the expenses eligible corresponding to the taxpayer's rights in the group deducted up to a limit of € 6,250 for a single person and € 12,500 for a couple.
When the share of expenses exceeds these limits, the excess may be carried over to the 4 years following that of payment for the work or for 8 years in the event of a forest loss.Tax credit for remuneration of a management contract equal to 18% of the fraction of expenditure corresponding to the rights of the taxpayer in the group retained within the limit of € 2,000 for a single person and € 4,000 for a couple.
Tax reduction for timber and forest insurance contributions equal to 76% of the fraction of the amount of contributions paid by the group corresponding to the rights of the partner within the limit of € 6 per hectare insured and € 6,250 for a single person and € 12,500 for a couple.
Reduction of tax for the prevention of forest fires equal to 50% of the fraction of the amount of contributions paid to Authorized Trade Union Associations (ASA) aimed at carrying out work for this purpose corresponding to the rights of the partner, in the limit of € 1,000 per tax household.
Investor Profile
Investment in woods and forests is recommended for taxpayers domiciled for tax purposes in France, who have significant assets and who are subject to the IFI.
This investment is aimed particularly at people concerned about the environment, in a sustainable development issue, and who wish to build up a long-term heritage, transmitted from generation to generation.
GF detention
To be able to benefit from the reductions and credits of income tax, the investment must be carried out by natural persons.
The investment can be made through a "family" forestry group, under certain conditions (except for the tax reduction during the acquisition which only benefits individual investors - see below).
A joint purchase is quite possible.
Each co-owner benefits from the reduction or tax credit calculated on his share in the purchase price or on the fraction of the work expenses incumbent on him according to this same share.
The investment can also be made in dismemberment.
The tax reductions for acquisition and insurance contribution are calculated in proportion to the acquisition price paid by each.
The tax credits are calculated in proportion to the expenses of forestry work or the remuneration paid under the management contract by each of them.
Note: Individuals who are unable or unwilling to complete the acquisition of a forest parcel can choose to subscribe to shares in a Groupement Foncier Forestier (GFF). The plot is bought jointly by several partners who delegate management to an administrator.
GF yield
The investor acquiring Groupement Forestier units will benefit from a potential annual return which will be made up of two main sources of income:
The exploitation of wood from the invested forest,
Hunting and fishing rights regulated by forest users.
In general the yield is around 2% and is largely exempt from income tax and CSG / CRDS.
Indeed, the group is subject to a discharge tax called the cadastral flat rate.
A Forest Land Group (or GFF) is a civil society with a forestry vocation. Its activity is therefore essentially linked to one or more forest areas and its activity relates to the management, exploitation and conservation of forest areas.
The secondary market is the most accessible, with entry tickets of a few thousand euros. By purchasing GFF shares, each investor becomes the owner of part of the group's assets. For this purpose, he receives a share of the income from the exploitation of said assets.
The GFI differs from the GFF (Groupement foncier forestier) by having the advantage of being part of public offers, thanks to the approval obtained by the AMF (Autorité des marchés financiers). Forest groups have the status of special civil societies which aim to acquire forests or land to be afforested as well as their improvement, conservation and equipment. Investing in IFM consists of acquiring shares in a forest savings company or forest groups that manage your assets.
In practice, investing directly in a forest is very expensive and you have to be competent to manage it yourself. Thus, the forest groups (GFF and GFI) were created with the aim of making investment in forests accessible (from € 5,000), while diversifying over a complete forest park (dozens of forests) and by delegating the management to professionals.
Take advantage of the advantageous taxation of forestry investment:
On income tax:
The tax reduction obtained through the subscription of Groupements Forestiers d'Investissement is 25%.
Tax credits and reductions for forestry investments are subject to the cap on tax loopholes (with the exception of the tax reduction for the prevention of forest fires).
IFI:
The shares of Groupement Forestier d'Investissement benefit from an IFI exemption of 75% up to 101,897 euros, and 50% beyond this amount.
In some special cases, the exemption may be 100%
On inheritance tax:
The shares of Groupement Forestier are exempt from inheritance and gift tax up to 75%, provided they have been held for more than 2 years and are part of a sustainable management commitment.
On capital gains:
The sale of forestry group shares is subject to the real estate capital gains regime for individuals.
The capital gain tax is reduced by an allowance of € 10 per year of title holdings and per forest hectare held by the group up to the taxpayer's rights in the share capital.
Advantages & Disadvantages of forestry investment
Forest investment
Example of investment in forestry investment through GFF / GFI
1
Initial situation
Pauline and Didier are subject to real estate wealth tax (IFI) and pay € 5,000 in taxes per year on their income.
They would like to invest their savings (€ 25,000) in an investment that would allow them to reduce their income tax, without increasing their IFI.
2
Investment via GFF / GFI
Not being attracted by the financial markets, their CGP offers them to acquire GFF shares in order to take advantage of the innumerable tax advantages that result from it.
3
Final situation
Thus, Pauline and Didier have:
They benefited from a 25% tax reduction of € 11,400: or € 2,850;
They did not increase their IFI;
And have invested in property on which their heirs will pay low inheritance tax.
