Overseas Investment Tax Incentives in France: The Girardin and Related Schemes

Overview: Why Overseas Investment?

Overseas investment is one of the most powerful défiscalisation tools available to French taxpayers. The tax advantages are substantial, and uniquely among personal tax incentive schemes they are governed by a separate specific cap before the global ceiling even comes into play. However, the source material is explicit on risk: these investments are by nature risky — with particularities of local markets, physical distance, exposure to cyclones, and social unrest — and they are primarily suited to experienced investors. Turnkey operations are typically assembled by specialist firms, and the quality and seriousness of the intermediary is critical: any failure to respect the conditions of application may result in the tax reduction being clawed back by the tax authorities.

The following schemes are available under the loi Girardin framework as extended to 31 December 2029 by Finance Act 2022-1726 of 30 December 2022:

Eligible Territories

The CGI Art. 199 undecies B scheme (productive investment) covers investments made in the overseas departments (DOM): Guadeloupe, Martinique, French Guiana, Réunion, and Mayotte; and the overseas collectivities and territories: Saint-Martin, Saint-Pierre-et-Miquelon, New Caledonia, French Polynesia, Saint-Barthélemy, the Wallis-and-Futuna Islands, and the French Southern and Antarctic Territories.

The rehabilitation works scheme (Art. 199 undecies A) and the social housing scheme (Art. 199 undecies C) apply across these territories, though certain conditions differ by territory. The Pinel and Loc'Avantages adaptations apply in the DOM and at Mayotte. The FIP outre-mer scheme is available to individuals domiciled in any of the overseas territories listed above.

Scheme 1: Girardin Industriel — Productive Investment (CGI Art. 199 undecies B)

The Girardin industriel scheme provides an income tax reduction for private individuals who make productive investments in eligible sectors in the overseas territories, within the framework of a company subject to income tax (impôt sur le revenu). The typical structure is that the individual subscribes to the capital of a dedicated company — usually a société en nom collectif (SNC) or a société par actions simplifiée (SAS) — set up to finance the overseas investment. In exchange, the individual receives the tax reduction.

Rates of reduction

Calculating the base

The calculation base is the cost of the investment excluding tax and fees, reduced by the portion of the acquisition price financed by any public aid received or applied for.

Sectors excluded and prior approval requirements

Certain sectors of activity are entirely excluded from the scheme. Enterprises operating in the DOM are excluded if their turnover for the last completed financial year was at least €10 million. Enterprises in difficulty are excluded when they operate in a DOM or in Saint-Martin. For investments in certain sectors or above certain amounts, the benefit of the scheme requires prior approval (agrément préalable) from the tax authorities.

Imputation and carry-forward

The reduction is imputed on the income tax due for the year in which the investment is put into service. For acquisition or construction of buildings, it is imputed in the year the foundations are completed. For hotel renovation works, it is imputed in the year the works are completed. If the reduction exceeds the tax due, the balance may be carried forward and imputed against income tax for up to five further years, with the specific overseas investment cap applied each year. Any amount remaining after that five-year period is lost.

Asset retention requirements

The company making the investment must retain the acquired assets and maintain them in their qualifying use for at least five years (or their normal useful life if shorter), or for at least seven years if the normal useful life is seven years or more. The individual investor must retain their shares in the company for five years from the date the investment was made (reduced to normal useful life if shorter, from 1 January 2023). Failure to comply triggers recapture of the tax reduction in the year of disposal, change of use, cessation of eligible activity, or disposal of shares.

Scheme 2: Rehabilitation and Seismic/Cyclonic Reinforcement Works (CGI Art. 199 undecies A)

Private individuals with their tax domicile in metropolitan France or in the DOM may benefit from a tax reduction when they carry out, in the overseas territories, rehabilitation or seismic/cyclonic reinforcement works on older housing stock, up to 31 December 2029.

Eligible works and property

The scheme covers works of rehabilitation or reinforcement against seismic or cyclonic risk, carried out by a company (not self-performed), on housing that has been completed for more than 20 years. Works constituting deductible charges for revenus fonciers purposes under CGI Art. 31 are excluded. The investor must commit, for five years, either to using the housing as their principal residence from the date of completion of the works, or to letting it unfurnished within six months of completion as the tenant's principal residence.

Calculating the base and reduction

The base equals the cost of materials and equipment used plus the corresponding labour costs, as shown on the contractor's invoice. For investments made in 2022, the base is capped at €2,727 per square metre of habitable surface area, regardless of location; VAT is then added and the result multiplied by the number of habitable square metres. This base is spread over five years: the annual base is 20% of the amounts actually paid by 31 December of the year in which the right to the reduction arose. The rate of reduction is: 18% (base rate); 22% where equipment producing energy from a renewable source is installed; 26% where the housing is located in a quartier prioritaire de la politique de la ville.

No cumulation; recapture

For the same expenditure, the reduction cannot be combined with the SME capital subscription reduction, the Duflot-Pinel-Denormandie reduction, or the overseas investment deduction. The reduction is clawed back on: failure to comply with the five-year commitment; disposal before end of commitment; or démembrement during the commitment period (except where resulting from the death of one spouse in a jointly taxed couple). Recapture runs from the year of breach — all reductions used in prior years and the year of breach are recaptured together in the year of breach. If reimbursed within five years for all or part of the qualifying expenditure, the attributable tax benefit is recaptured — but not where the reimbursement follows an insured loss.

Scheme 3: Social Rental Housing Investment (CGI Art. 199 undecies C)

Private individuals with their tax domicile in France may benefit from a tax reduction for investment in social rental housing in the overseas territories, up to 31 December 2029. Investment may be made directly or through an SCPI, a French société de personnes, or a company subject to corporate tax whose exclusive purpose is the acquisition, construction, and letting of eligible housing — provided at least 95% of subscription proceeds are applied to the investment within 18 months of the close of the subscription.

Eligible investments

Qualifying investments include: acquisitions or construction of new housing in Saint-Pierre-et-Miquelon, New Caledonia, French Polynesia, Saint-Martin, Saint-Barthélemy, and Wallis-and-Futuna; acquisitions of housing completed more than 20 years ago undergoing rehabilitation to near-new performance standards or seismic/cyclonic reinforcement; renovation and rehabilitation of housing over 20 years old in priority zones in Tahiti, New Caledonia, and Saint-Martin; and demolition works preparatory to new construction (foundations completed within two years of demolition end). For programmes exceeding €2 million, a fraction of the housing cost must correspond to renewable energy or insulation works. Programmes exceeding €2 million, or those through IS companies regardless of amount, require prior approval from the Minister of Finance.

Letting conditions and mandatory disposal

Within 12 months of completion or acquisition, the housing must be let unfurnished for at least five years to an approved social housing body (HLM, société d'économie mixte, or approved body under CCH Art. L 365-1 or local regulations). The housing body must sub-let to private individuals as their principal residence, subject to tenant resource ceilings and rent limits set in CGI Ann. III Art. 46 AG sexdecies. At the end of the five-year letting period, the housing must be sold to the social housing body or to private individuals designated by that body satisfying certain resource conditions; the sale price must be fixed by a convention concluded no later than the date of signing of the lease.

The tax reduction and the 70% retrocession obligation

The reduction equals 50% of the acquisition cost (net of taxes, acquisition commissions, and public subsidies). The base is capped at €2,727/m² (2022). For demolition operations: capped at €25,000 per demolished unit. For renovation/rehabilitation: capped at €50,000 per unit. For programmes over €2 million, a fraction must correspond to renewable energy/insulation. Critically, 70% of the amount of the reduction must be retroceded to the social housing body in the form of reduced rents; the same retrocession applies to the sale price on disposal. The reduction is granted in the year of completion or acquisition; it may be imputed without limit against the tax due; any balance carries forward over five following years, after which any remainder is lost. Subject to both the specific overseas cap and the global cap on tax incentives.

Scheme 4: Pinel Overseas (CGI Art. 199 novovicies, XII)

The Duflot-Pinel-Denormandie reduction applies to investments made in the overseas territories with specific adaptations, including enhanced rates vs the metropolitan scheme.

Enhanced rates (investments from 1 September 2014)

Rent ceilings (2022)

Monthly rent ceilings per square metre (excluding charges): €10.74 for all overseas departments, Saint-Martin, and Saint-Pierre-et-Miquelon; €12.87 for New Caledonia, French Polynesia, and the Wallis-and-Futuna Islands. Multiplier coefficient: 0.7 + 19/S (capped at 1.2). Surface area includes varangues (covered tropical terraces) up to 14 m².

Tenant resource ceilings (2022)

The Pinel overseas reduction is taken into account for the global ceiling on personal tax incentives. Conditions for Saint-Barthélemy have not yet been set.

Scheme 5: Loc'Avantages Overseas

The Loc'Avantages rent reduction scheme applies in Guadeloupe, French Guiana, Martinique, Réunion, and Mayotte on the same conditions as in metropolitan France, with specificities. The housing must meet at least one energy performance improvement: thermal insulation works on roofs, exterior walls, glazed openings and exterior-facing doors, or lower floors; or installation, regulation, or replacement of high-performance heating systems or domestic hot water production systems. At Mayotte, monthly rent ceilings per m² (2022) are: €10.73 (Loc 1 — intermediate); €8.16 (Loc 2 — social); €6.36 (Loc 3 — very social). The multiplier coefficient described above applies. Surface area includes varangues up to 14 m². Tenant resource ceilings for Loc 1 at Mayotte are the same as the Pinel overseas ceilings; Loc 2 and Loc 3 resource ceilings are set in CGI Ann. III Art. 2 terdecies H, II-2.

Scheme 6: FIP Invested Overseas — 30% Reduction (CGI Art. 199 terdecies-OA, VI ter A)

Private individuals whose tax domicile is in one of the overseas territories covered by the scheme (Guadeloupe, French Guiana, Martinique, Réunion, Mayotte, Saint-Barthélemy, Saint-Martin, Saint-Pierre-et-Miquelon, New Caledonia, French Polynesia, and the Wallis-and-Futuna Islands) may benefit from a specific income tax reduction for subscriptions to units in fonds d'investissement de proximité (FIP) invested in the same territories. The conditions and terms of application are the same as those for the ordinary FIP reduction, except that the rate of reduction is 30% (vs 18% for the standard metropolitan FIP).

The Specific Overseas Investment Cap (CGI Art. 199 undecies D)

The total amount of income tax reductions obtainable under the overseas investment schemes is subject to a specific overall ceiling of €40,000 per tax household, applied in the following order of imputation:

• First: the reduction for social housing investment (CGI Art. 199 undecies C) and carry-forwards of that reduction, within a sub-limit of €40,000;
• Then: the reductions for productive investment (Art. 199 undecies B) and private-sector housing investment (Art. 199 undecies A), within a sub-limit of €30,600 (reduced by the amount already imputed for social housing).

This ceiling is increased in certain cases — in particular for investments made by an operator within their own company, and for productive investments given on lease. The taxpayer may also opt to replace these ceilings with a single ceiling equal to 15% of the net global income of the tax household. After application of this specific overseas cap, the global ceiling on personal tax incentives (plafonnement global des niches fiscales) may further reduce the amount of reductions actually imputable.

This article covers the six main overseas investment tax schemes for private individuals (CGI Art. 199 undecies A, B, C, and D; CGI Art. 199 novovicies XII; CGI Art. 199 terdecies-OA VI ter A). Monetary thresholds (rent ceilings, cost-per-m² caps, resource ceilings) are those in force for 2022 as indicated in the source; current values should be verified with the current CGI annexes. The schemes are extended to 31 December 2029 by Finance Act 2022-1726 of 30 December 2022 Art. 13. Investors should seek specialist legal and tax advice before committing to any overseas investment structure.