Does the withholding tax require a revision of tax exemption strategies? This is an issue that deserves a lot of thought, especially with respect to real estate solutions that offer large tax credits. If the withholding tax will not affect the net tax payable on the year, the rate of tax deduction (and refund of tax credits) may have significant consequences for some taxpayers, who real estate tax exemption.
Case study with the current situation
Under the current regime, the calculation of the taxpayer’s installments takes into account the tax credits. Also, for a household that pays 6,000 euros in tax and realizes a real estate transaction in Pinel, with a tax reduction of 3,600 euros per year to the key, for 9 years, pays 600 euros each month, out of 10 month. But as soon as its Pinel takes effect, the annual tax falls to 2,400 euros for a monthly payment of 240 euros.
It must therefore be noted that for a candidate in Pinel, such an operation reduces the monthly tax from 600 euros to 240 euros.
What changes with the withholding
The annual tax of 6,000 euros will not change with the withholding tax, nor the tax credit of 3,600 euros. The household (taken as an example) will continue to pay € 2,400 net tax for the year. Nevertheless, the pace of payment of the tax will change. With the withholding tax, it will be possible to spread the tax payment over 12 months instead of 10. But it will be without the tax benefits that will be repaid in one go in August.
In concrete terms, our household will pay 500 euros of tax each month to obtain a refund of 3,600 euros in August.
Impact of withholding tax on property tax exemption
Admittedly, the annual balance sheet will remain the same, but the withholding tax will impact directly on the budget of fans of tax exemption. In the example we have taken here, the household will have to pay for example 3,500 euros of taxes between January and July, against 1,680 currently.
In this case, the tax exemption solutions do not ultimately allow to reduce the tax deadlines. Some households may not even be able to invest in real estate abroad because of a lack of personal budget in the first half of the year.
Professionals to the rescue
The various players in the real estate sector are very worried about this change. Most of them would like to get an accommodation from Bercy, like the tax credits for home-based employment. The cash advance that households will have to make may be limited by restoring the tax credit several times over the year. Otherwise, tax-free real estate could suffer.