Overseas tax reduction for rental property: conditions and commitment

First, a clarification, because it changes everything: according to the 2026 tax guide (2025 income), the investment period for the tax reduction under Article 199 undecies A of the French General Tax Code (CGI) for overseas housing extends until December 31, 2017, for new properties, and the reduction is only extended until December 31, 2029, for renovation work. The French Official Tax Bulletin (BOFiP) (BOI-IR-RICI-80-20-10, paragraph 425) specifies a different deadline for certain new rental properties: properties for which the building permit was issued on or after January 1, 2013, are not eligible. This page does not reconcile these two texts: the dates should be verified with the tax authorities before making any decision.

This page describes the conditions and commitments of this scheme for those who already own an eligible property or are planning renovations. It does not provide information on returns, reduction rates, or program comparisons. The figures are based on the texts read on October 18, 2026.

What is the current status of the system?

The tax brochure indicates that the reduction applies to investments made between July 21, 2003, and December 31, 2017, in the French overseas departments, Saint-Pierre-et-Miquelon, New Caledonia, French Polynesia, Wallis and Futuna, and the French Southern and Antarctic Lands, and since 2007 in Saint-Martin and Saint-Barthélemy. It targets the construction or acquisition, no later than December 31, 2017, of a new building.

From 2018 onwards, the brochure states that the reduction "is extended until 31.12.2029 only for rehabilitation work." The period to which a given property falls is the first thing to identify and confirm for the reasons mentioned above.

This scheme is separate from that of social housing (Article 199 undecies C) and that of productive investment (Article 199 undecies B). These two other reductions have their own pages.

The 5-year commitment

To benefit from the reduction, the taxpayer undertakes to keep the property for 5 years, using it for:

• either at his main residence; ;
• either for unfurnished rental, for use as the tenant's main residence.

In the intermediate sector, the commitment to unfurnished rental is 6 years, according to the brochure.

The rental period. According to the brochure, the accommodation is rented unfurnished, for use as a main residence, within 6 months of completion or acquisition.

The tenant. According to the brochure, the rental is granted to persons other than the spouse or civil partner. Members of the tax household and company partners are also excluded.

The resumption. For rehabilitation or reinforcement work, the brochure only details the recovery process for expenses reimbursed within 5 years: the reduction is recovered up to the amount reimbursed, except in cases of damage occurring after payment. This page does not describe other cases of recovery.

The base and ceiling per square meter

According to the BOFiP (BOI-IR-RICI-80-20-10, version in force since 10/03/2026), the basis for the reduction is the cost price or acquisition price of the housing, or the amount of rehabilitation or reinforcement work.

For real estate, the base amount is capped per square meter of living space: €3,295 excluding VAT per m² for 2026, an amount that has been maintained since 2025. The brochure also states €3,295 excluding VAT per m² for investments made in 2025. For a dwelling used as a primary residence, the relevant surface areas are:

For a single person living in their own home, the basic ceiling is 65 m² × €3,295 = €214,175 excluding VAT. This page does not describe the surface areas applicable to rented accommodation.

The spread and the triggering event

The triggering event This refers to the completion or acquisition of the property. For construction work, it refers to its completion date.

The spreading. The reduction is generally spread over 5 years, at a rate of 20 % of the base amount per year. For renovations, it applies in the year of completion and the following four years. A 10-year spreading period, at 10 % per year, is available for a new building that the owner uses as their primary residence.

The charge: no refund, no deferral

The reduction is applied to the tax calculated according to the progressive tax scale, after the tax discount and before any tax credits. The BOFiP (Official Bulletin of Public Finances) states that when the tax due is less than the reduction, "the excess cannot be refunded or carried forward." The brochure confirms this: "No carry-forward of the excess.".

This is a clear difference from productive investment, where a five-year deferral exists. An annual fraction exceeding the year's tax liability is lost.

Ceilings and cumulative amounts

The specific ceiling. The brochure indicates, for the taxation of 2025 income, a ceiling of €30,600 on the annual portion of the tax reduction, with no carry-forward of any excess, or, optionally, a percentage of taxable income. The BOFiP (BOI-IR-RICI-80-20-20, version of 08/07/2015) links this ceiling to Article 199 undecies D of the French General Tax Code (CGI) for investments made from 2012 onwards: the ceiling is set "at €30,600 in absolute value" or "at 11% of taxable income, at the taxpayer's option.".

The overall cap. The overseas tax reduction line appears in the €18,000 ceiling section of the BOFiP (BOI-IR-LIQ-20-20-10-10, version of 27/08/2026).

The non-accumulation. According to the BOFiP (paragraph 490) and the brochure, investments eligible for the tax reduction are excluded from a list of tax benefits. These include the depreciation of new rental properties, the offsetting of property deficits against total income, the PEA (equity savings plan), the Duflot and Pinel tax reductions, and exemption from inheritance tax. This list is longer and can be found in its entirety in the BOFiP and the brochure.

The approval. Prior approval from the Minister in charge of the budget is required if the amount of investments in housing, excluding main residence and excluding reinforcement work, exceeds €2,000,000, since 01/11/2009.

The statements and documents

The tax reduction is declared on form 2042-IOM. Form 2083 (for businesses) or 2083-PART (for individuals) is submitted electronically. Documents listed in the brochure include: the rental or occupancy agreement, a copy of the lease, the tenant's tax assessment notice (for those in the intermediate sector), and, if applicable, the building permit.

An annual fraction exceeding the tax: a numerical example (fictitious profile)

Situation. A hypothetical homeowner, residing in France, renovates an overseas property which she then rents out unfurnished within six months. Her total tax reduction is assumed to be €15,000. This amount is hypothetical; this page does not publish any actual tax rate.

Issue. Measure what spreading and the absence of carry-forward produce in the first year, if his tax liability is only €1,800.

Strategy. Divide the reduction into five fractions of 20 %, compare the fraction of the year to the tax, then note what is not deductible.

Result.

The annual €3,000 portion is less than the €30,600 cap. The same mechanism applies each year: only the portion that can be offset by the year's tax liability is used. The profile, the amount of the reduction, and the tax liability are hypothetical. The figures illustrate the calculation and do not reflect your specific situation.

Overseas housing: what changes depending on your situation

• The nature of the operation : an investment prior to 2018 or rehabilitation work, only eligible from 2018 onwards according to the brochure.
• The use of housing : main residence or unfurnished rental, and intermediate sector, which extends the commitment to 6 years.
• Your tax level each year of the spreading, since the surplus is lost.
• The territory and the tenant's identity.
• Your other tax advantages, which fall within the limits and rules against combining them.
• The amount of investments, which may require approval.

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