Denormandie

Investing in the Pinel Denormandie law: tax relief through renovating old properties

The Pinel Denormandie scheme is a powerful tool for those who wish to invest in older properties while reducing their taxes. Introduced in 2019 and extended until 31 December 2027, it is aimed at individuals who purchase older properties in need of renovation in certain municipalities, with a commitment to rent them out as a primary residence. This mechanism combines tax benefits, asset appreciation and support for urban regeneration.

Unlike the traditional Pinel scheme, which applied to new properties (and which ends in 2024), Pinel Denormandie aims to renovate older properties located in areas where rental demand is high and housing needs to be modernised.

The advantages of Pinel Denormandie

The main advantage of this scheme is the income tax reduction, which can be up to 21% of the cost price of the property (up to a limit of €300,000 per year and €5,500 per square metre).

• Tax flexibility: tax reduction spread over 6, 9 or 12 years depending on the length of the rental commitment.

• Wealth optimisation: possibility of investing directly, via an SCI (property investment company) or even through SCPI (real estate investment trust) shares.

• Regular rental income: collection of rent through unfurnished rental as a primary residence.

• Renting to a relative: possibility of renting to an ascendant or descendant (outside the tax household).

• Credit leverage: as with any property investment, debt allows you to benefit from optimised financing.

• Value-adding work: renovated housing gains in comfort, energy performance and asset value.

Constraints and limitations to be aware of

Like any rental investment, Pinel Denormandie comes with certain obligations:

• Compliance with rent and tenant income caps, set according to geographical area.

• Minimum rental commitment of 6 years, extendable up to 12 years.

• Standard rental risks: vacancy, unpaid rent, poor management.

• Tax reduction capped by the tax break scheme (€10,000/year).

• Investment limited to two properties per year.

• Unused tax gains cannot be carried forward.

The success of the operation therefore depends on the choice of property, the quality of the work and the rental attractiveness of the area.

Eligibility conditions for goods and works

To benefit from the tax advantage, the investment must meet several strict conditions:

• Purchase of an older property to renovate or conversion of premises into residential accommodation.

• Work representing at least 25% of the total cost of the operation (property + work).

• Work carried out by an RGE-certified professional.

• Rental within 12 months of acquisition or completion of the work.

• Location of the property in an eligible municipality: Action Cœur de Ville programme, agreed revitalisation area, or co-ownership in difficulty.

Compliance with energy standards: consumption < 331 kWh/m²/year and improvement of at least 20 to 30% in energy performance depending on the type of property.

Taxation and reduction rates

The amount of the reduction depends on the length of the rental commitment:

• 6 years: 12% tax reduction.

• 9 years: 18%.

• 12 years: 21%.

The calculation basis includes the purchase price, notary fees and the cost of the work, up to a limit of €300,000 per year.

Example: for an investment of €200,000, including €60,000 in renovation costs, the reduction can be up to £24,000 over 6 years, £36,000 over 9 years, or £42,000 over 12 years.

What type of investor is this suitable for?

The Pinel Denormandie scheme is suitable for investors who:

• Have a tax liability of at least €3,000 per year (otherwise, the tax benefit cannot be fully exploited).

• Wishing to diversify their property portfolio while contributing to urban regeneration.

• Seeking a long-term rental investment with regular income.

• Wishing to combine tax optimisation and inheritance planning through an SCI (property investment company) or joint ownership investment.

However, it is not suitable for non-taxable taxpayers or those seeking high returns without management constraints.

Practical points to remember

• Rental only for unfurnished properties and as a primary residence.

• Prohibition on transferring the property (sale or donation) before the end of the commitment period.

• Rental to a relative (child, parent) is possible as long as they are not part of the tax household.

• Please note that rent and income limits must be complied with at all times, otherwise the tax benefit may be revoked.

• Check geographical eligibility using the official Denormandie simulator.

Conclusion

The Pinel Denormandie scheme is an attractive opportunity for investors wishing to reduce their tax bill while investing in the renovation of older properties. Combining tax benefits, asset appreciation and civic engagement in the revitalisation of town centres, it is a powerful lever for building a long-term strategy.

However, success depends on a rigorous analysis of the local rental market, the quality of the work undertaken and strict compliance with legal and tax obligations. Used correctly, it becomes an effective tool for combining profitability, tax exemption and contribution to the energy transition.

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