Tax credits for ecological upgrades to homes in France

Benjamin A. Kergueno, LL.M > Post on tax law > Tax credits for ecological upgrades to homes in France
Tax-credits-ecological-upgrades-homes-France

In France, if you incur expenses to perform energy saving works you may under certain conditions receive a tax credit.

This possibility called CITE (« Credit d’Impôt Transition Energétique » – “Energy Transition Tax Credit”) is applicable under certain conditions:

  • Your home should be established in France (Metropolitan France or DOM);
  • It should be your primary residence (this is a problem for non-residents) on the date of payment of the expense incurred for the works;

Note that if the works are done in a housing that will become your main residence in a short period (6 months from the payment of the invoice), you may benefit of CITE, in case if in the moment of paying the invoices you own or rent this accommodation. If you are not an owner neither a tenant and you incur such expenses you will not be able to benefit from CITE, even if you owned during this short period however you have given the property for the rent.

Be aware, that according to administrative doctrine the principal residence means: the housing which is composed of rooms of dwelling and immediate dependencies (ex: cellar / garage) you will not be able to carry out work of energy saving on your swimming pool and hope to obtain the benefit of CITE on these expenses.

  • The housing should have been finished at least 2 years ago;

As we have indicated all persons having their principal residence in Metropolitan France or in the DOM may benefit from CITE, such possibility relates the owners but also the tenants, or even free occupants housing. (Example: parents have a home in Saint Jean Cap Ferrat and they make it available – free of charge – to their children who make it their main residence).

Also note that if the main residence is not owned directly but indirectly through a SCI “Société Civile Immobilière” subject to the tax regime of companies, the shareholder who occupies the house as a principal residence and which carries out works in favor of the energy transition will be able to benefit from CITE.

Eligible expenses for CITE are the ones if the works are done:

  • By a company that will supply the materials (so you cannot buy these materials yourself) and who will install them;
  • By a contractor that will use a subcontractor for the installation of these materials and that will charge him for the supply and installation of these same equipment, materials.

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One last condition and this one is the most important, the company which will take care of the supply of materials / equipment and which will take care of the installation should to be certified RGE (« Reconnu Garant de l’Environnement » – “Recognized Guarantor of the Environment”). All companies do not have this qualification and if works are done by a company that does not have the RGE qualification in these cases you will not be entitled to the benefit of CITE.

In the case of subcontracting, the assessment of the EGR qualification will be done at the level of the subcontracting company and not at the level of the ordering company, it will be sufficient for the invoice details to appear on the invoice. subcontracting company with EGR quality.

For expenses incurred for carrying out the works as of 1 January 2016, CITE requests additional conditions that were not requested before, namely: the benefit of CITE is now conditioned to the visit of the housing, before any operation and especially before an offer of an estimate, so that the company that will carry out the works validates the project and certifies that the works are possible in the housing.

Among the expenses required to CITE we will not make an exhaustive list however we will mention the main expenses (in materials and equipment) in favor of saving energy:

  • Individual or collective boilers with high energy performance other than those using fuel oil (excluded from CITE benefits from 1 January 2018);
  • Gas micro-CHP boilers;
  • Heating control and programming devices.
    For example: in the latter category we have all the devices that allow the regulation of heating based on various factors: the evolution of the temperature inside, outside …
  • Thermal insulation expenses concerning the floors, the walls in facade, the roof terrace …
  • The cost of insulation materials for all or part of a production or distribution plant for heat or hot water;
  • Expenditure on heating equipment or hot water production (solar-powered equipment with solar collectors, water-based equipment, wood-burning boilers or other biomass)
    Be aware that power generation equipment using solar radiative energy and wind-powered electricity generation equipment are not eligible for the tax credit. The previous paragraph concerning the use of solar energy serves not for the production of energy but for the production of hot water.
  • Certain expenses related to heat pumps, connection to a heat network.

Until January 1, 2018, the expenditures eligible for the tax credit were much larger but the finance law of 2018 extended this device but also restricted the scope.

The following expenses are excluded from the benefit of CITE: expenditure on oil-fired boilers, replacement of single glazing with double glazing, expenses for insulation shutters and entry doors.These exclusions do not apply to taxpayers who have already accepted a quote and paid a deposit before January 1, 2018.

On the other hand, it is important to know that the benefit of CITE has been extended until December 31, 2018, however for the year 2019 this possibility will be modified and replaced by a bonus, paid during the performance of the works.

CITE is therefore entitled to a tax credit which will be deducted from the amount of income received in the year in which these expenses are paid. For example, if you have done these works in 2017 and paid for it in 2017, you will be entitled to this tax credit in 2018 on your return for income earned in 2017. (This tax credit will be shown on your return 2042 RICI)
Of course, the tax credit does not cover the totality of the expenses paid but will be up to 15 or 30% of the amount of expenses paid.

As all tax incentives, there are limits to CITE: – for expenses actually paid giving entitlement to CITE, covering the principal residence of an individual, the latter cannot obtain a tax credit higher than the following amounts for a period of 5 consecutive years:

  •  8,000 euros for an unmarried taxpayer, not bound by a PACS (Civil Solidarity Pact), single, widowed or for a divorced person;
  • 16 000 euros for a married or pacsed couple.

However, these expenses may be increased by a sum of 400 euros per person with expenses (descendants, invalids …)

The CITE base includes all the expenses (supply of materials, installation of these materials and equipment). These expenses will have to be invoiced by the company TTC “All taxes included”, thus including VAT. The price of labor that corresponds to the installation of equipment and materials, some materials as seen previously (limited expenses for the year 2018), administrative fees are excluded from the CITE base.

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