In my capacity as a French accountant, tax specialist and wealth engineer, I am very often confronted with confiscatory tax pressure with my French clients. Pressure weighing on their portfolio of rental real estate assets. This article is here to highlight real estate investment in Mauritius for the French.

The Challenges of Real Estate Taxation in France

Tax Pressure on Real Estate Assets

Indeed, French taxation imposes significant charges on property owners.
  • property transfer duties and associated notary fees (approximately 8%),
  • taxation on land income (approximately 50% including social contributions of 17.2%),
  • the tax of 36.2% (before deduction for holding period) on real estate capital gains,
  • the IFI (Real Estate Wealth Tax, i.e. approximately 1%
  • and finally taxes (land, household waste, etc.)
come to nullify the efforts to build up real estate assets in France.

The Mauritian Alternative

Advantages of the Franco-Mauritian Bilateral Convention

Mauritius offers more advantageous taxation for French real estate investors thanks to the bilateral convention between the two countries. This agreement provides for reduced tax rates and exemptions on several types of income and capital gains. To legally circumvent this tax obstacle, it seems relevant to me to take an interest in the assets/advantages offered by the Franco-Mauritian bilateral agreement to consider investing/diversifying your real estate assets via the acquisition of an apartment/ investment villa in Mauritius.

The double taxation agreement stipulates in particular that:

  • Article 6: Land profits are taxable at 15% and discharge oftax in France
  • Article 24 paragraph c: Dividends paid by a Mauritian real estate company (subject to the IS of 15%) are taxable in France at the Flat Tax of 30% while benefiting from a Mauritian tax credit of 25%
  • Article 13: Real estate capital gains are exempt from tax in Mauritius (6.15% transfer tax and notary fees on the sale price) like in France
  • Article 23: Real estate and shares in Mauritian SCIs do not enter into the IFI in France
It is specified that there is no tax applicable to Mauritian real estate assets and/or income (property tax, housing tax, household waste,…) In view of the above, Mauritian rental investment appears to be an effective alternative solution for investing or strengthening/diversifying your portfolio of real estate assets.

Investment Options and Tax Advantages

Based on this advantageous observation, the Group COLBERT MAURITIUS wanted to offer French tax residents rental real estate products to be built (VEFA) guaranteeing an annual net return (before tax of 15%) of 4% of the acquisition price over a minimum contractual period of 36 months. The international standard real estate products offered and the promise of guaranteed returns also benefit from:
  • The financial guarantee for completion of works (GFA) issued by a premium Mauritian bank;
  • Certification by an international control office
  • The advance payment of 4% of the acquisition price for the annual rent upon receipt of the villa/apartment.

From a legal, financial and tax perspective, there are several solutions to acquire the asset concerned:

  • Acquisition directly by the individual via a cash contribution and/or French or Mauritian bank financing (generally around 70% over 15 years)
  • Acquisition via a “transparent” Mauritian SCI which confers the same tax effects but which authorizes the dismemberment of shares and the anticipation of a planned transmission to children and/or the surviving spouse
  • Acquisition via a Mauritian SCI subject to corporate tax (IS 15%) which will provide the same inheritance benefits as above with however a significant absence/reduction in property tax generated by the 30-year depreciation of the property (except for the value of the land).
 

Conclusion :

Finally, real estate investment in Mauritius presents itself as an effective solution to French taxation. With significant tax benefits and higher potential returns, it is an attractive option for diversifying and optimizing your property portfolio. We encourage you to use our financial and tax simulator to compare the advantages of an investment in Mauritius compared to France.
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