Azur Verdon Immo - Loi Malraux
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THE MALRAUX LAW

Renovating an old property in the city center makes it possible to enrich oneself and reduce taxes thanks to the Malraux law.

Ideal for mitigating steep tax increases

Les principes de la Loi Malraux

The principles of the Malraux Law

The principle of the 2018 Malraux law tax exemption, created by Mr. André Malraux in 1962, is to protect French real estate assets by encouraging renovation programs for buildings located in protected areas (there are nearly 100 in France), 'an area for the enhancement of architecture and heritage, or an old degraded district.

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A protected sector is an urban area subject to specific rules regarding the conservation, restoration and enhancement of all or part of a set of buildings, whether built or not ”(Town planning code, art. L. 313 -1). These sectors include in particular the historic centers of many French cities.

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The aim of the Malraux law is thus:

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1. to avoid the disappearance or irreversible damage to historic districts by instituting legal protective measures

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2. to requalify the historical, architectural and urban heritage and modernize old housing to ensure a quality of occupancy in accordance with the contemporary way of life by means of specific operational intervention mechanisms.

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The owners of built buildings located in certain protected areas, who carry out work for the complete restoration of these buildings, benefit from a tax reduction if the income from the rental of the building comes from the income category land.

The Malraux tax exemption law is governed by article 199 tervicies of the General Tax Code.

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Réduction d’impôt accordée par la Loi Malraux

Tax reduction granted by the Malraux Law

The tax exemption under the Malraux Law grants in 2018 a tax reduction on restoration work undertaken by the owner on buildings located in the Protected Sector.

This tax reduction is:

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  • 30% for operations carried out in a protected area

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  • 22% for operations carried out in a ZPPAUP (Urban or Landscape Architectural Heritage Protection Zone)

Malraux operations are generally located in Historic Town Centers and offer investors an excellent opportunity for tax exemption and good medium and long-term protection of their heritage.

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The tax reduction can go up to € 120,000 over a year. The law specifies in fact that the maximum reduction is 30% of the work, which is capped at € 400,000 every 4 years.

Conditions to be respected in the Malraux Law 2019

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In order to be eligible for a tax exemption under the Malraux Law, the program must meet the following conditions:

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  • The renovation program must cover the entire building.

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  • The investor must make a commitment to lease the property bare for 9 years. The resulting rental commitment must be implemented within 12 months of the completion of the renovation work.

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  • Work carried out under an eligible Malraux program must not be spread over a period exceeding 3 years following the issuance of the building permit, except in the event of an archaeological excavation.

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  • The work must be carried out under the supervision of a French Building Architect and must be the subject of an authorization issued by the Prefect before the start of the work.

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  • The work eligible for the tax reduction of the Malraux Law is the work of demolition, reconstruction of roofs, exterior walls of existing buildings, transformation of housing, public utility, transformation of attics or attics in order to to make them habitable, repair, maintenance and improvement to the exclusion of expansion work.

Conditions à respecter en Loi Malraux 2018

Buildings affected by the law

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The buildings affected by a Malraux operation are:

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- buildings used for housing before and after the work has been carried out;

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- buildings originally intended for housing and reassigned for this use: the buildings concerned are those which have temporarily lost this use in favor of other uses and whose change of use has modified the design, layout and equipment initials;

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- professional buildings according to article 199 quatervicies of the CGI, if the income they generate is subject to property income.

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Les immeubles concernés par la loi

Rental commitment imposed by Malraux legislation

The taxpayer must make a commitment to rent the property for 9 years to someone other than a member of the tax household, an ascendant or a descendant of the taxpayer.

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In the event of ownership by a company not subject to corporation tax, it must undertake to rent the premises for 9 years and its partners to keep the shares for 9 years.

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In the presence of residential premises, it must be rented for use as the tenant's main residence when the lease is signed and during the rental commitment.

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Engagement de location imposé par la législation Malraux

Who can perform a Malraux operation?

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Can benefit from the tax reduction:

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- natural persons and the natural person associates of certain companies, provided that these persons are domiciled in France for tax purposes. CGI. art. 4 B

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- non-residents known as “Schumackers”, assimilated to persons tax domiciled in France.

- the proceeds from the rental of the building must be taxed in the category of property income. Excluded are catering expenses carried out on goods appearing in the assets of a sole proprietorship subject to income tax, even if they are rented bare.

- partners of companies not subject to IS (excluding SCPI), the tax reduction is possible as soon as the rental income from this building is taxed in the hands of the partners in the category of property income. In this case, the partners can benefit from the tax reduction for the share of the catering expenses they have incurred.

- if the property is subject to joint ownership, each of the joint owners benefits from the tax reduction calculated on the fraction of eligible expenses corresponding to their rights in joint ownership.

- people who hold a dismembered right to the building cannot benefit from the reduction. The benefit of the tax reduction is reserved for taxpayers who hold full ownership of the building or titles.

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Qui peut réaliser une opération Malraux ?

Malraux investment example

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You are buying an apartment of 100 m², in a building in the Safeguarded Sector, eligible for the Malraux law. The building located in Nîmes, includes 20 apartments and is sold for € 3,000 per square meter of land and will be renovated for a total of € 2,700 of work per square meter (Common Areas + Private Areas).

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You will carry out € 270,000 of work in your apartment which will have cost you € 300,000 to purchase, the work will last two years but will be spread over 3 fiscal years:

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Annual amount of work paid: € 90,000 Annual Tax Reduction: € 27,000

Exemple d’investissement Malraux
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