What do you want to know?
Why invest in the Girardin law ?
The so-called “Girardin” law created tax exemption systems which grant taxpayers domiciled in France a reduction in income tax, in return for investments benefiting the overseas economy in the overseas departments and regions ( DROM) and overseas communities (COM).
To be eligible for the Girardin social reduction, builders' projects must be the subject of a study and validation by the State, the main shareholder, as well as by local authorities, so as to minimize the risk of bankruptcy. .
This overseas tax exemption, ethical and solidarity-based, even ecological, rewards private investment in the French overseas departments and territories with an immediate tax advantage (subject to compliance with the conditions linked to this device): you invest in 2021 and benefit from a tax reduction from 2022 of up to € 60,000.
The tax advantage provided will be of the order of 115% to 120% of an amount invested to lose funds, and not giving rise to the right to payment of dividends or income. So the only gain made is that generated by the “one shot” tax reduction.
There are 3 main devices in Girardin:
Le Girardin Industriel: The Girardin Industriel law aims to stimulate the economic development of the French overseas departments and territories through the revival of private investment. The idea is to try to restore economic equality with the metropolis
Le Girardin social housing: The DOM TOM Girardin tax exemption system now makes it possible to finance social housing buildings leased to SEM (Mixed Economy Company), which are semi-public structures.
The Girardin IS: The Girardin IS is a tax exemption system which allows a metropolitan investor who is a legal entity subject to corporation tax, thanks to an ethical and solidarity investment, to deduct, in the same year, from its taxable income a sum greater than the amount of investments made and located in overseas territories.
Girardin Law: greater tax exemption than your investment by supporting overseas communities
What is the Girardin tax exemption law ?
The so-called “Girardin” law created tax exemption systems which grant taxpayers domiciled in France a reduction in income tax, in return for investments benefiting the overseas economy in the overseas departments and regions ( DROM) and the overseas communities (COM).
Girardin devices offer a tax reduction: if the amount of this reduction is greater than the tax due, the balance will not be refunded by the tax authorities, unlike a tax credit.
However, this unallocated balance in the first year can be carried over to income tax in subsequent years, up to the fifth year.
The Girardin tax exemption system is the only system allowing taxpayers to benefit from a tax reduction greater than their initial investment, hence its significant success with people subject to a significant IRPP. In fact, the higher the amount of the tax, the higher the profit from the operation will be in absolute value since the gain is expressed as a percentage of the tax exempted.
These devices aim to help investments in French overseas territories by reducing the additional production and construction costs inherent in the remoteness of the metropolis, geographic isolation and insularity. They make it possible to fight against the deficit of social housing in these territories.
In practice, the investor benefits from the tax reduction in year N + 1 from the payment of his contribution. This is what the assemblers of these operations regularly call a “one shot” tax reduction. Indeed, although the investor has the obligation to remain a partner of the umbrella company for a minimum period of 5 years, he receives the tax advantage only at the beginning of the period.
If he wishes to benefit from a recurring tax reduction, he must therefore invest each year in another tax exemption program.
Tax residence & Beneficiaries
Only natural persons, French tax residents within the meaning of article 4 B of the CGI, domiciled in metropolitan France or in the overseas departments, can benefit from the tax reduction.
French tax non-residents, liable to IR on the basis of their income from French sources alone, cannot benefit from the system.
Concerning the industrial Girardin:
The beneficiaries of the tax reduction can be :
natural persons in sole proprietorship who "acquire, create or lease, productive investments within the framework of their business [exercising an industrial, commercial, craft or agricultural activity]",
the partners of a company or members of a group subject to IR which makes productive investments,
the partners of a company automatically subject to corporate tax which makes investments with rental to an operator.
The company must be owned directly and exclusively by individuals who are French tax residents.
Amending finance law for 2009non-owner operators taking charge of the renovation and rehabilitation of hotels, tourist residences and classified holiday villages.
the partners of a EURL holding shares in a company subject to IR which makes productive investments.
Regarding Girardin Social:
The beneficiaries of the tax reduction can be:
Individuals, through direct investment
The partners of a SCPI
Partners of a company not subject to corporate tax, directly or through a one-person limited liability company, headquartered in France, held exclusively by eligible taxpayers, whose share of the income is the company is subject on their behalf to income tax (SEM partners or HLM company authorized.
The partners of a company subject to corporate tax, provided that all the partners are natural persons, French tax residents within the meaning of article 4 B of the CGI. The company cannot have a legal person partner.
Places concerned
Investments must be located in Overseas:
Overseas Departments (Martinique, Guadeloupe, Guyana, Réunion, Mayotte),
New Caledonia,
Saint-Pierre-and-Miquelon,
French Polynesia,
Wallis and Futuna Islands,
Southern Lands,
French Antarctica,
Saint-Barthélémy,
Saint-Martin.
Taxation of the Girardin system
The industrial Girardin allows you to benefit from an overall tax reduction (for all metropolitan investors) of 44.12% of the tax-exempt base (all of the funds collected from the 3 partners) for files without approval, and 45.30% for those with approval.
This tax reduction of up to 53.55% (63.42% with retrocession of part of the tax reduction to the operator of the investment that you made if you gave it in location).
The real estate component of the Girardin social tax exemption system was created to address the severe rental shortfall, a recurring problem in the overseas islands. When buying or building a new home in the Overseas Territories, the purchaser can benefit from a tax reduction.
In summary
The investor participates in the economic development of overseas territories.
He benefits from a substantial tax reduction, which can reach 50% of the amount of the investment.
Investments in the overseas islands are subject to a higher ceiling for tax loopholes than in mainland France: € 18,000.
The purchaser builds a real estate heritage in a tourist environment.
The part of the Girardin IS system dedicated to metropolitan companies subject to IS is codified in article 217 undecies of the General Tax Code. With the Girardin law, companies subject to corporation tax can deduct from their taxable income an amount equal to the amount of acquisitions of new housing for rental use, located in the overseas departments. The excess deficit can be carried forward indefinitely over the following financial years (art. 209 of the CGI).
Metropolitan businesses subject to corporation tax via the reduction in the cost price of overseas financing can generate a profitability generally around 10% the year of their investment.
Overseas entrepreneurs can buy productive equipment necessary for the development of their activity at a significant discount.
The amount of the deduction: this is equal to the amount of the investment made, possibly minus the portion financed by public subsidies.
The tax assistance will therefore be the cost price excluding tax and fees, for example notary or file fees.
Conservation
In order to benefit from the tax reduction, the business or company that made the investment must keep the property and maintain its allocation for at least 5 years or during the period of use of the good if this is less than 5 years.
In addition, the partner of the company having invested must keep these securities (units or shares) for at least 5 years from the completion of the investment (CGI art. 199 undecies B, para. 25).
Otherwise, the tax reduction applied is the subject of a recovery, the same applies, in principle, in the event of the death of the taxpayer.
However, by a ministerial response dated May 24, 2011, it was admitted that in the event of the death of the taxpayer or of one of the spouses subject to joint taxation before the expiry of the 5-year period, the reduction of The tax that has been charged is not subject to recovery. "Therefore, in the event of death, the possibility of using the portion of the tax reduction that has not yet been charged will be terminated."
Functioning
The aim of this system is to call on private investors to finance industrial projects or social housing real estate projects, by offsetting the additional costs linked to geographic distance and insularity. The device is therefore intended for taxpayers who want to participate in overseas projects and who wish to benefit from a tax reduction. Currently, the Girardin is available through three systems: the Girardin social housing, industrial and the Girardin lS.
In practice, the taxpayer will make a contribution in a portage company (a non-refundable contribution, also called a "one shot" investment) which purchases industrial goods or social housing, which will be rented to overseas companies or tenants according to preferential conditions for at least 5 years.
The counterpart of this capital investment is a tax reduction that is logically greater than the initial investment. The specialists marketing Girardin generally evoke a profitability of between 11% and 16%.
Ceiling & Questioning of the reduction
The tax advantage of the Girardin system is affected by the capping of tax loopholes. The total benefits cannot be greater than a double cap: l
The first of € 10,000 (global ceiling excluding Sofica discounts and investments in overseas departments and territories)
The second of € 18,000 (specific to overseas territories, and the Sofica tax reduction).
The total amount of tax benefits for a taxpayer investing overseas cannot exceed € 18,000.
Investments in Girardin are not excluded from the IFI.
In the event of non-compliance with one of the retention obligations or commitments made by the taxpayer, the tax reduction applied is taken back for the year in which the event occurs.
Recovery case:
the property or shares of the company are sold during the term of the commitment
change in investment allocation
cessation of eligible activity
termination of the rental contract within 5 years of the provision of the property to the tenant or during the normal period of use of the property
Governed by article 199 undecies B of the General Tax Code, the Girardin Industriel system revolves around a company (SNC, SAS or SA), which carries out acquisitions of industrial equipment thanks to financing from investors and loans banks, and leases them to an operating company as part of an eligible activity.
The Girardin device follows a structured scheme:
1. Establishment of the system and creation of the carrier company: Creation of a carrier company in the form of a Société en Nom Collectif (SNC) for Girardin industrial operations as of right, or even a Simplified Joint Stock Company (SAS) or Société Anonyme (SA) for industrial operations with tax approval.
2. Purchase of industrial equipment by the portage company, rental and operation of the property for 5 years
The portage company buys the industrial equipment that the identified overseas operator (the SME DOM-TOM) needs. The latter then pays 10% of the initial contribution. Metropolitan tax investors, for their part, generally finance the project for 40% via the holding company which sold its shares / shares to them. Investors undertake to keep them for a minimum of 5 years. The balance is paid by a bank loan contracted by the portage company.
The portage company rents the equipment thus financed to the operator eligible for the Girardin industrial system for a minimum period of 5 years.
3. Liquidation of the SNC and transfer of the equipment to the operator
At the end of the lease, the overseas tenant has the option of becoming the owner of the property.
The Girardin is one of the most efficient tax loopholes to reduce his income tax.
By investing in Overseas Departments and Collectivities, you can indeed benefit from a tax reduction of up to 120% of the amount invested! This is the investment that presents the strongest lever for tax exemption.
The Girardin industrial system therefore has three components:
The fully-fledged industrial Girardin, intended to finance overseas industrial projects costing less than 250,000 euros. It does not require any approval from the tax administration. This type of operation allows you to benefit from a tax reduction of up to € 40,909, starting at € 2,500 in tax.
The industrial Girardin with approval applies to overseas industrial projects with a budget exceeding 250,000 euros. For projects costing between 250,000 euros and 1 million euros, the approval of the local tax administration is sufficient. If the project exceeds one million euros, then the approval of the Ministry of the Economy and Finance will be necessary. This type of operation allows you to benefit from a tax reduction of up to € 52,941.
The Girardin law for companies, in force since January 2003, allows all companies subject to corporation tax (IS) to be able to acquire new rental property in the overseas departments, regions and communities. (DROM-COM, formerly the French overseas departments and territories). A means of promoting and encouraging the purchase and construction of new housing in the Overseas Territories. In return, the Girardin law for companies offers tax advantages to companies having made these rental investments. The latter can thus deduct the entire amount of the real estate investment from its taxable income and be exempt from corporation tax over one or more years.
Example :
Investment of € 15,000 to reduce your taxes.
Suppose that the projects offered to you offer all the necessary guarantees and a profitability of 30% (contractual rate).
By investing € 15,000 in year N, you will be the partner of several companies, and benefit from a tax reduction of € 19,500 which will be allocated to you the following year.
Advantages & Disadvantages of the Girardin device
Girardin device
Example of investment in Girardin law
1
Initial situation
Jack & Lucie are married and have two children.
They pay 4061 € in taxes per year on their income. They would like to invest their savings (€ 3,500) in an investment that would allow them to reduce their income tax, without increasing their IFI.
2
Investment via Girardin devices
They are investing on the advice of their CGP € 3,500 in the Girardin Industriel system in 2021.
For his part, the editor borrows € 5,730 (thanks to their contribution).
The assembler therefore invests € 3,500 + € 5,730 = € 9,230 in industrial Girardin.
This gives entitlement to a tax reduction of € 9,230 × 44% = € 4,061.
They therefore benefit from this tax reduction in 2022.
And the editor benefits from what will be left of the investment after five years.
3
Final situation
In summary, Jack and Lucie invested € 3,500, which reduces their income tax by € 4,061. This device therefore completely eliminates their income tax.
The immediate gain is therefore € 4,061 - € 3,500 = € 561, or € 561 / € 3,500 = 16% of their investment.
