Buildings: tax arrangements
The tax regimes applicable to buildings protected as historic monuments, labeled by the Heritage Foundation, or located in remarkable heritage sites are detailed below.
Provisions concerning income tax
Deduction of property expenses related to historic monuments or labeled by the Heritage Foundation whose management does not generate income (income tax-IR)
Description
In order to ensure the conservation of the heritage, and to take into account the requirements related to the legal regime of buildings classified or registered as historic monuments and the device of buildings labeled «Heritage Foundation», these buildings benefit from the following regime: property expenses are deductible from total income, totally or partially, depending on whether the building is open to the public or not.
The deduction applies to the total income of the year, and any surplus does not entitle to a carry-forward of income in subsequent years.
Justification
The tax regime for historic and labeled monuments does not constitute a tax optimization product, but is the counterpart of additional charges actually borne by the owners in the interest of the conservation of the national heritage.
By allowing owners to direct their investments in the restoration of their monuments, the scheme supports the activity of highly qualified companies spread throughout the country.
By promoting the preservation and preservation of the architectural heritage, this system also contributes to the tourist attractiveness of the regions.
Tax cost 2020: 40 M€ (PLF 2020, Ways and Means Volume II)
References
General Tax Code (CGI):
article 156-II-1 ter ;
Annex III, Articles 41 E to 41 J ;
Annex IV, Articles 17t to 17 quinquies A.
Imputation on the total income without limitation of the amount of land deficits incurred by the owners of historical monuments classified, registered or labeled by the Heritage Foundation (income tax - IR)
Description
The land deficit from buildings classified or listed as historic monuments is attributable, without limitation of amount, to the total income of the owner of the historic monument or labeled and carried forward until the sixth year included.
Consideration of property expenses is subject to the following conditions:
- the commitment to retain ownership of the immovable concerned for a period of at least 15 years from its acquisition;
- the direct holding of the immovable, subject to exceptions concerning civil companies not subject to corporation tax, and applicable under one of the following conditions;
- The immovable is, in whole or in part, classified or registered as a historic monument and is assigned, at the latest within two years following the date of its entry into the heritage of civil society, to housing for at least 75% of its living space,
- Or the building has been the subject of a classification order in whole or in part as a historical monument and is assigned for at least fifteen years to a non-commercial cultural space open to the public,
- Or the partners of the non-taxable civil society are members of the same family;
- the absence of co-ownership of the immovable, unless the immovable is, in whole or in part, classified or registered as a historic monument and is affected, not later than two years after the date of the division, at least 75 % of its living space.
Justification
Tax deductions for historic monuments are the fair consideration for the conservation and development obligations of private owners who own 44% of historic monuments and generate tax revenues various.
State aid is essential to maintain this unique heritage in a good state of conservation and prevent it from being massively sold and dismembered by buyers not concerned about the conservation of the monumental heritage.
Tax cost 2020: 62 M€ (PLF 2020, Ways and Means Volume II)
Income Tax Reduction for the Restoration of Built Buildings in Remarkable Heritage Sites: New Malraux Scheme (Income Tax – IR)
Description
The Finance Act for 2009 carried out a profound reform of the so-called «Malraux» regime by transforming the deduction of expenses into a reduction of IR on the one hand, and by substantially adjusting the conditions of application of the regime (in particular by setting up a mechanism to cap advantage) on the other hand.
In remarkable heritage sites, this tax reduction is 22%, it is increased to 30% in the presence of an approved safeguarding and development plan (PSMV). In the degraded old quarters defined inarticle 25 Law No. 2009-323 of March 25, 2009 and the neighborhoods of the new urban renewal program (NPNRU), the tax reduction is 30%.
The amount of expenses entitled to the tax reduction may not exceed the sum of 400,000 € for a period between the date of issue of the building permit or the expiry of the period of opposition to the prior declaration and 31 December of the third following year.
Justification
The malraux device is part of a public policy to develop and requalify urban centres. It has made it possible to carry out numerous rehabilitation of buildings in protected areas.
This mechanism responds to public policy objectives that go beyond private interests, by encouraging the realization, for the rental market, complex operations for the restoration of buildings that would not be possible simply through the use of common law housing assistance schemes. The work carried out allows to preserve the architectural heritage at the same time as they participate in the housing policy. It is these characteristics and the objective of a new stimulation of investment that led the legislator to extend the device in 2009 to buildings located in a degraded old district and in 2015 to those located in an old district with a concentration high old degraded habitat, as well as to exclude, under the Finance Law for 2013, the mechanism for capping certain tax benefits referred to in theIMC Article 200 O-A.
This system was the subject of a joint evaluation in December 2018 of the General Inspectorate of Finance, the Cultural Affairs Inspectorate and the General Council for Environment and Sustainable Development, particularly with regard to the issues of small and medium-sized towns.
At this stage, the Government does not envisage any major evolution of the «Malraux» regime.
Tax cost 2020: 26 M€ (PLF 2020, Ways and Means Volume II)
References
General Tax Code (CGI),
section 199 tervicies
Registration and stamp duty
Exemption for listed or listed historical monuments and shares of family SCI holding property of this nature
Description
Classified or registered immovables, as well as movable and immovables by destination which constitute their historical or artistic complement, are exempt from transfer duties free of charge (DMTG). This exemption is subject to subscription by the heirs, legatees or donees with the ministry in charge of culture, after assent of the ministry in charge of the budget, an agreement for an indefinite period setting out the conditions for access to the public and the conditions for the maintenance of the goods concerned.
This system is open to individuals who are either isolated, grouped together in an undivided unit or grouped together in a family real estate company. Since the Finance Act for 2019 (Article 120), in order to streamline and speed up the procedure for examining applications for a convention, the signature of the convention by the minister responsible for the budget is replaced by a assent which, by delegation of the minister, is issued by the regional or departmental public finance directorates 1 of the location of the property.
Justification
The purpose of exemption from inheritance or transfer tax is to avoid the dispersion of assets. Indeed, this device is part of the means implemented to maintain on site movable objects and present to the public movable collections in relation, from a historical and artistic point of view, with the exempt monument.
This system encourages private owners to keep protected property in their or their families' hands. It thus guarantees the continuity of management methods in compliance with the rules relating to historic monuments.
The benefit of the tax benefit is conditional on the conclusion of an indefinite agreement between the donees or legatees and the Minister responsible for Culture, after the assent of the Minister responsible for the budget. This agreement provides in particular the conditions of public access, maintenance of the property concerned as well as those relating to the maintenance and presentation in situ and furniture.
References
General Tax Code (CGI):
Article 795 A;
Annex III to the CGI, Article 281 bis;
Decree No. 2003-1238 of 17 December 2003.
order of 24 April 2019 deconcentrating the procedure provided for in Article 795 A of the General Tax Code
VAT
Conditions of application to buildings protected as historic monuments of the reduced rate of VAT of 10 % applicable for certain works in residential premises
Description
Improvement, conversion, development and maintenance work shall be subject to the reduced VAT rate of 10 % where it concerns premises for residential use completed for more than two years.
As such, properties protected as historic monuments, as well as heritage that is not classified or not listed, benefit from this reduced rate if they meet the conditions related to the use of the premises and the duration of completion.
Thus, for premises partially allocated to housing:
- where the premises are used in whole or primarily for residential purposes (at least 50 % of the total area), the reduced rate of 10 % shall apply to all work on the premises;
- where the premises are used primarily for a purpose other than housing (more than 50% of the total area), the reduced rate applies to work carried out in rooms of the premises used exclusively for housing.
Where works are carried out in buildings protected as historic monuments in which paid visits are organised:
- the monument is considered in its entirety to be for residential use provided that the persons concerned have not renounced the exemption from VAT of the income from the visits and that no part of the building is used for any purpose other than the dwelling. In this situation, the works carried out in these buildings are therefore eligible for the reduced rate in their entirety;
- the monument is considered to be of mixed use where the persons concerned have renounced the exemption from VAT of the revenue related to the visit or where another part of the monument has a use other than the dwelling (assignment in particular to a professional or commercial activity).
In this situation, the VAT rate applicable to the work is determined according to the main use of the monument:
- if more than 50% is allocated to housing: reduced rate on the whole;
- if less than 50%: reduced rate on rooms only used for housing.
References
General Tax Code (CGI),
article 279-0 bis.
Advertising display on historical monuments
A practical sheet presents the derogating mechanism subject to the authorization of the regional prefect and points of attention for the contracting authority and/ or the owner who finance works thanks to the revenues collected.
Advertising display on historical monuments
Consult the practical sheet which presents the derogating mechanism subject to the authorization of the regional prefect and points of attention for the contracting authority and/ or the owner who finance works thanks to the revenues collected.
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