Overseas territories: social housing and tax reduction

Article 199 undecies C of the French General Tax Code (CGI) provides for an income tax reduction for the acquisition or construction of new social housing in the French overseas territories. This reduction is equal to 50% of a base amount calculated on the cost price of the housing. In return, the housing is rented unfurnished for at least five years to a social housing organization, then transferred under an agreement (either to the organization or to individuals it chooses), and a portion of the tax benefit is returned to the organization. For the overseas departments, the tax authorities' guide sets the deadline at September 24, 2018; for other territories, the deadline is December 31, 2029.

This page describes the mechanism according to the BOFiP (Official Bulletin of Public Finances) and the administration's brochure. It does not provide the rebate rate or the portion of the reduction included in the ceilings: these two figures should be verified with the BOFiP and the brochure. It also does not address the choice of a program or operator.

Who is eligible for the discount?

For individuals with their tax residence in France. The BOFiP (Official Bulletin of Public Finances) states that "only investments made by individuals" within the framework of managing their private assets are eligible for the tax reduction. Non-residents taxed solely on their French-source income, without being considered residents of France, are not eligible. The BOFiP specifies that the reduction also applies to "Schumacker non-residents," who are treated as tax residents of France. The program can be held directly or through a company; the rules for companies are covered by another BOFiP (BOI-IR-RICI-380-10-30), which is not included here.

The territories and the dates

Sources: BOFiP, BOI-IR-RICI-380 (version in force since 15/05/2024, which cites Law No. 2022-1726, Article 13), BOI-IR-RICI-380-10-10 and IR 2026 brochure. For the overseas departments, the 28/06/2023 version of BOI-IR-RICI-380 (¶ 20) indicates that Article 30 of Law No. 2018-1317 eliminates the scheme for investments that had not been the subject of a declaration of commencement of works, or for which the application for approval had not reached the administration, by September 24, 2018. The 2024 version does not include this date: current situations should be consulted in the source.

What is eligible

The BOI-IR-RICI-380-10-10 (version of 15/05/2024) lists four types of investments:

• the construction or acquisition of new housing; ;
• the acquisition of housing completed more than twenty years ago, with rehabilitation; ;
• the renovation or rehabilitation work on these dwellings; ;
• demolition prior to the construction of new social housing.

For renovation, the BOFiP refers to work for which a prior declaration or a building permit application is filed from 1 January 2024. For demolition, the BOFiP refers to work for which a building permit application is filed from 1 January 2022, with specific rules in Saint-Martin.

The mechanism, step by step

1. Invest. The taxpayer acquires or has the dwelling built.
2. Rent from a social housing organization. The housing units must be "let unfurnished or under a lease-purchase agreement for at least five years to a social housing organization." The lease must be granted within twelve months of completion or acquisition for buildings completed or acquired on or after July 1, 2018. The organizations concerned include public housing authorities, limited companies for social housing, mixed-economy companies operating overseas, and, in the overseas territories, locally approved organizations.
3. To sublet. The organization must sublet the accommodation for at least five years to individuals who make it their main residence, within income and rent ceilings.
4. To back down. The taxpayer must return a minimum portion of the tax benefit to the organization through a rent reduction. The rate can be found in the BOFiP (BOI-IR-RICI-380-10-20 § 330) and in the brochure: the page does not specify it.
5. To sell. At the end, the housing must be transferred to the tenant organization (§ 300); the agreement, concluded at the latest when the lease is concluded, may provide for a transfer to natural persons chosen by the organization (§ 310).

Prior approval from the Minister responsible for the budget is required, particularly for programs exceeding two million euros (§ 380; other cases are listed in this paragraph). For Saint-Martin, compliance with EU law on services of general economic interest is also required.

How is the discount calculated?

• The rate. The BOI-IR-RICI-380-20 states: "The tax reduction is equal to 50 % of the base".
• The basics. It is comprised of the cost price of the housing or works, less taxes and commissions paid and public subsidies received. Subsidies granted by overseas collectivities within the framework of their own tax authority have no impact on the calculation of the base (BOI-IR-RICI-380-20 § 1).
• The basic ceilings. The base amount is limited to a specific sum per square meter of living space, which the BOFiP (Official Bulletin of Public Finances) does not reproduce (see BOI-BAREME-000019, not included here). For renovation work, the ceiling is €50,000 per dwelling; for demolition, it is €25,000 per dwelling demolished.
• The triggering event. It is constituted by the date of completion of the dwelling, or by the date of its acquisition if it is later.
• The postponement. The unused balance can be carried forward to income tax for the following five years, without refund after this period.

The caps

Two ceilings overlap.

• The specific overseas cap. The total of the tax reductions under Articles 199 undecies A, B, and C cannot exceed €40,000 or 15% of taxable income. The portion of the Article 199 undecies C reduction included in this calculation should be verified in BOI-IR-RICI-380-20 § 270 and the accompanying brochure; this page does not provide this information.
• The overall cap. The BOFiP (BOI-IR-LIQ-20-20-10-10, version of 27/08/2026) places article 199 undecies C in the section of the €18,000 ceiling, on the line "Tax reduction granted for certain investments made overseas".

How to declare

The BOI-IR-RICI-380-20 refers to form no. 2042-IOM (cerfa 14220) with its calculation sheet, and form no. 2083-SD (cerfa 13445), which concerns the nature, location, financing, and operation of the investment. The BOFiP does not provide box numbers: refer to the forms for these numbers.

If the conditions are no longer met

The BOI-IR-RICI-380-30 (version in effect since June 15, 2022) stipulates that the tax reduction will be reclaimed if the property or the associated rights are sold or divided before the five-year lease period expires, or if a condition ceases to be met. It lists two exceptions: death, provided the beneficiary commits to fulfilling the remaining obligations, and a change in marital status. It also outlines penalties. Read this BOFiP document before making any decision to sell.

Overseas tax reduction: a numerical example (fictitious profile)

Situation. A hypothetical taxpayer, residing in France, invests in a new property intended for a social housing organization, located in an area where the scheme remains applicable. The cost price is €100,000. Taxes, fees, and public subsidies to be deducted amount to €10,000. The price per square meter is not exceeded. Their income tax is €6,000 per year for six years, i.e., the year of the taxable event and the following five years. These are hypothetical scenarios.

Issue. What reduction is calculated before ceilings, and what portion can be applied to the tax within the carry-forward period?

Strategy. Calculate the base (cost price less deductions), apply 50 %, then allocate the reduction to the tax of the year and the following five years.

Result.

In this scenario, €9,000 of the calculated tax reduction is not applied: the carry-forward is not refunded after five years. With an annual tax liability of €9,000 under the same assumption, the entire calculated reduction would be applied within the allotted time. This calculation is gross: it does not take into account the reimbursement to the tax authority, the specific cap, or the overall cap, all of which can reduce the benefit. This scenario is hypothetical, and the result is not indicative of your specific situation.

Overseas tax reduction: what changes depending on your situation

• The territory. The French overseas departments have been removed from the scheme (except for situations ongoing on September 24, 2018); the other territories mentioned have a deadline of December 31, 2029.
• Your income tax. The reduction is applied to the tax of the year and then carried forward for five years, without reimbursement at the end.
• Your other tax advantages. The specific overseas cap and the overall cap apply.
• The nature of the investment. New construction, rehabilitation, renovation or demolition do not have the same basic ceilings.
• The amount of the program. Above two million euros, prior approval is required, as in other cases listed in the BOFiP.
• Commitment. Five years minimum lease, sublease, transfer provided for in the agreement and repurchase.

The rule depends on your situation. No results are guaranteed.