Overseas territories: tax reduction for productive investment, principle and limits

The tax reduction under Article 199 undecies B of the French General Tax Code (CGI) is available to individuals domiciled in France who make a new productive investment in a business operating overseas. This is not a financial investment; it is the purchase of capital equipment, subject to certain excluded sectors, approval in some cases, a retention obligation ranging from five years (or the normal useful life if shorter) to fifteen years depending on the circumstances, caps, and limited carry-forward.

This page describes the principle and limitations, without performance or assembly details. The figures are from texts read on 18/10/2026.

The principle

According to the BOFiP (BOI-BIC-RICI-20-10), taxpayers domiciled in France within the meaning of article 4 B of the CGI can benefit from the reduction for new productive investments made in a company carrying out an agricultural, industrial, commercial or craft activity falling under article 34 of the CGI.

The territories concerned are the overseas departments (including Mayotte), Saint-Pierre-et-Miquelon, New Caledonia, French Polynesia, Saint-Martin, Saint-Barthélemy, Wallis and Futuna, and the French Southern and Antarctic Lands. The 2026 tax brochure (for 2025 income) gives a deadline of December 31, 2029; this date appears only in this source and should be verified before making a decision.

Non-residents taxed in France solely on their French-sourced income are excluded. "Schumacker non-residents," who derive the majority of their income from France, are treated as persons domiciled in France.

Two ways to invest

By exploiting it oneself. The sole proprietorship, company, or group making the investment must operate it within the framework of an eligible activity. The company's tax regime, including micro-enterprise status, is irrelevant.

Without exploiting, through rental. The owner who does not use the property can benefit from the tax reduction if they lease it to the operating company, subject to certain conditions. They must then pass on a portion of the tax advantage to the operator. The BOFiP (Official Bulletin of Public Finances) stipulates that at least 66% of the tax reduction must be passed on to the operating company, and the brochure indicates a rate of 56% for amounts less than €300,000 per operator.

For partnerships, only individual partners domiciled in France are eligible for the tax reduction, in proportion to their ownership interests, and only if they are present at the close of the financial year. Joint ventures are excluded.

What the investment should be

• Nine. A new item is "an item that has just been manufactured or built and has not yet been used".
• Tangible and depreciable. Patents and software (except software inseparable from an eligible asset), goodwill and non-depreciable land are excluded.
• Initially, in the French overseas departments and territories and in Saint-Martin. The aid must be for an initial investment as defined in European Regulation No. 651/2014. Replacing worn or obsolete equipment does not qualify. The investment cannot be used by a company in difficulty.
• In the French overseas departments, a company with a turnover of less than €10 million. According to the brochure, the tax reduction is reserved for companies with a turnover of less than €10 million. A tax credit also exists for companies in the French overseas departments and territories (DOM), and those below this threshold must choose between the tax reduction and the credit.

Excluded sectors

The BOFiP (BOI-BIC-RICI-20-10-10-40) sets the rule: the listed sectors "do not qualify for tax relief." The list below summarizes the main excluded sectors; it is not reproduced verbatim, and the BOFiP takes precedence. Specifically excluded are:

• trade (buying and reselling without transformation); ;
• restaurants and bars, with limited exceptions; ;
• advice and expertise; ;
• education, health and social action; ;
• banking, finance and insurance; ;
• real estate activities and, since 01/01/2024, the rental of furnished tourist accommodation (with exceptions); ;
• cruise navigation, self-drive rentals and car repair, with exceptions for certain activities; ;
• business services, except maintenance, cleaning, contract packaging and call centers; ;
• leisure, sport and culture, with some exceptions; ;
• the non-profit sector and the postal sector.

The building and public works sectors remain eligible.

The base and the rates

The base is the cost price excluding taxes and expenses of any kind. Public subsidies are deducted. Non-recoverable VAT is excluded from the base. Amortizable transport, installation and commissioning costs remain included (BOI-BIC-RICI-20-10-20-10, version of 19/08/2026).

The rates from BOI-BIC-RICI-20-10-20-20 (version of 02/07/2025). The BOFiP refers to the standard rate; surcharges exist depending on the nature of the investment and are not addressed here:

The 56 % rebate rate does not apply to companies subject to corporation tax in a rental scheme.

The numerical limits: ceilings, allocation, carryover

Two ceilings. The common cap for overseas tax reductions (Article 199 undecies D) and the overall cap of Article 200-0 A. The line item "Tax reduction granted for certain investments made overseas" appears in the section on the €18,000 cap in the BOFiP (BOI-IR-LIQ-20-20-10-10, version of 27/08/2026). Any amount exceeding the specific cap is permanently lost (BOI-IR-RICI-80-20-20, version of 08/07/2015). The amounts of this cap depend on the situation (reversion, participation in operations) and are not included here.

Imputation. The reduction is applied to income tax calculated according to the progressive tax scale, before any tax credits. It is not applied to taxes taxed at a proportional rate.

Report. The surplus is carried forward up to and including the fifth year. Any remaining balance is permanently lost.

Reimbursement, reserved for professionals. Taxpayers who participate in the operation of a business, as defined in Article 156 I 1° bis, may request a refund of the unused portion starting from the third year of carryforward, up to a limit of €100,000 per year or €300,000 per three-year period. Non-professionals are not eligible for any refund.

Conservation, recovery, approval

Conservation. The asset must be retained and used for the same activity for five years, or for its normal useful life if shorter, from the date the investment was made (BOI-BIC-RICI-20-10-20-50, § 1 and § 8). This period is extended to seven years for investments with a normal useful life of seven years or more, for investments made from January 1, 2022. It is fifteen years for hotels and tourist residences (§ 5), ten years for cruise ships (§ 7), and fifteen years for certain non-residential buildings constructed from January 1, 2024 (§ 7). The 2026 brochure (p. 314) only mentions five and fifteen years: the period applicable to your asset should be verified. Replacing the asset, even with an identical one, does not fulfill this requirement.

Resumption. If the asset is sold or ceases to be used for business purposes during the period, the reduction is reversed in the year in which this occurs. In a rental agreement, the reversal takes effect if a condition of the rental agreement ceases to be met.

Approval. The approval of the minister in charge of the budget is required for programs exceeding €1,000,000, for those exceeding €250,000 when the taxpayer does not participate in the operation, and for certain sectors (transport, agriculture, fishing, hotel renovation).

Regularity of the company. The investor and the operator must be up to date with their tax and social obligations on the date of the investment; the filing of annual accounts is assessed, according to the BOFiP (§ 200), with regard to the last five closed financial years.

Statements. Form 2042-IOM (Cerfa 14220) must be filed each year of profit or carryforward. Form 2083-SD (Cerfa 13445) describes the nature, location, financing, and operation of the investment. The BOFiP (French Official Tax Bulletin) stipulates a penalty of €1,500 for failure to file and €150 per omission or inaccuracy, capped at €10,000.

A craftsman in Martinique: a numerical example (fictitious profile)

Situation. A fictitious craftsman, tax resident in France, operates a manufacturing workshop in Martinique. His turnover is less than €10 million. He buys a new machine for €180,000 excluding taxes and receives €30,000 in public aid.

Issue. Knowing on what basis the reduction is calculated and how it is applied.

Strategy. Deduct the public aid from the price excluding tax, apply the normal rate of 38.25 % from the table, then allocate the reduction to the tax of each year, which is assumed to be equal to €15,000 before this reduction.

Result.

In this scenario, the tax reduction is fully applied over four years, within the carry-forward period. The machine's retention period depends on its normal usage time (see the previous section). The calculation does not test for caps or the effect of other reductions. The scenario, price, and tax are hypothetical. The figures illustrate the calculation and do not reflect your specific situation.

Productive investment overseas: what changes depending on your situation

• Your tax residence Non-residents are excluded.
• The territory, which sets the rate (38.25 % or 45.9 % in direct investment) and the rules applicable in the DOM.
• The operator's sector of activity and the nature of the good.
• Your role : direct operator or owner-lessor, with retrocession and approval according to the thresholds.
• Your tax level the years of imputation, and your other reductions.
• Professional status or not, which determines whether or not a refund is granted.
• Shelf life applicable to the property.

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