Forest taxation
I- Taxes
*Income tax
Article 63, Tax General Code (TGC)
Are considered as profits from farm holdings for the implementation of income tax, any incomes received by owners from exploiting their rural properties.
Those profits. include in particular those coming from forest exploitations.
Article 76, Tax General Code (TGC) Special regulation applied to forest exploitation.
Incomes linked with cuttings are tax free.
(Forest estimated system). Considering the length of forest exploitation. In compensation for tax exemption during timber cutting, tax payers must declare the cadastral income every year, even if there is no sale of timber cutting.
Incomes deriving from renting hunting right are taxable in the group: incomes from property.
Converted products sale, the moment the change shows an industrial aspect, are taxable in the group:industrial and commercial profits.
Incomes drawn from secondary products (fruit, acorn, resin), converted timber product sale, are taxable in group: farm profits.
Tax breaks
Finance Act 2009
* DEFI acquisition = Tax reduction for investment in woods and forests of less than 25 hectares and more than 5 hectares.
Private individuals who undertake to invest in woods and forests profit from a tax reduction equal to 25% of the amount invested within the annual limit of 5 700 euros for single people and 11 400 euros for married couples or partners linked with a civil pact of joint liability, submitted to common taxation. In other words, the maximum Tax break amounts to 1425 euros in the first case and to 2850 euros in the second one.
Investment can be achieved directly – with an obligation of keeping the property for 15 years – or indirectly – with an obligation of keeping it for 8 years- i.e. in the form of a subscription of shares in forest groupings or shares in forest savings companies.
Under the condition of a commitment to sustainable management for 15 years (SSM = Simple Scheme of Management, MRT = Management Regulation Type, CFGP = Code of Forest Good Practices).
* DEFI work = Tax reduction for expenses involved in work in forests of over 10 hectares.
The expenses involved in forest work which can be taken into account within the tax reduction of 25% can henceforth be retained within the limit of 6 250 euros for a single person , a widow or divorcee and of 12 500 euros for a married couple or partners linked with a civil pact of joint liability, submitted to common taxation.
The expenses involved in forest work can be taken into account over several years when they exceed the limits of 6 250 and 12 500 euros. Under the twofold condition of keeping the property for 8 years and subscribing a commitment of sustainable management equally for 8 years.(SPM, MRT, CFGP)
*Tax reduction for the expenses of remuneration paid for within the framework of a forest management contract (expenses of remuneration of forest groupings or forest savings companies and forest experts).
For the plots of less than 25 hectares, a reduction of 25% is granted, within the limit of 2 000 euros for a single person, a widow or divorcee and 4 000 euros for a married couple or partners linked with a civil pact of joint Liability, submitted to common taxation.
Under the condition of a commitment to durable management (SSM, RTM, CFGP)
* Wealth tax
Tax breaks
Article 885D GTC (General Tax Code)
To take into account the long period of forest production, a special system, currently called « Monichon Amendment » enables you to be exempted of Wealth Tax up to ¾ of the forest value, under the twofold condition of keeping your property for 30 years and subscribing a commitment to sustainable management
(SSM, RTM, FGPC)
Article 885-O V bis TGC
Tax breaks
This article has introduced a system for Wealth Tax reduction equal to 75% of the amounts paid on the account of direct subscription to the capital of Small and Medium sized businesses in a community sense, within the global annual limit of 50 000 €.
It must concern SMB, corresponding to the community definition, the above article concerned states that the company must exclusively have an industrial, commercial, traditional, agricultural or liberal activity, with the exception of managing activities of real property, specified in article 8850 quarter GTC
Agricultural activities mean those which provide incomes likely to come under the category of agricultural profits, including those coming from forest production even if the owners limit themselves to cuts of standing trees. Therefore, forest exploitation is eligible on this account.
It is to be noted that the condition of exercising exclusively must be met up to the fifth year after the subscription. Besides, the existence of a hunting lease should be considered as contrary to that condition.
* Capital gain taxes
Article 150 U TGC
Capital gain is the increase in value of a property between the purchase price and the resale price. Its tax rate is 27% ( 16% of taxes at source and 11% for social deductions).
After the fifth year of possession, a 10% deduction of this tax is applied per year. Total exemption is granted after 15 years of possession. Forest transfers whose price is less than or equal to 15 000 € are free of capital gain taxation.
II- Taxes
* Property tax
Article 1379 GTC
Any owner of a property held on January 1 of the taxation year is liable to property tax for the whole year. This tax is established by each municipality according to the taxable properties. It is based on the forest cadastral income which represents the annual average income of the whole cycle of production (from 25 years for poplar trees to 150 years for oak trees)
Tax breaks
Article 1395 GTC
- Sowed grounds, planted or replanted with wood give a right, temporarily to total exemption of the tax on unbuilt properties.
Tax exemption is of :
- 10 years for poplar trees
- 30 years for coniferous trees
- 50 years for leafy trees
Natural regenerations give a right, temporarily, to total exemption of the tax on unbuilt properties.
Tax exemption is of :
- 30 years for coniferous trees
- 50 years for leafy trees.
- Irregular plantations of trees on a balance for regenerations give a right to 25% exemption of the amount of undeveloped property tax, for a period of 15 renewable years.
* Sales Tax VAT
Two VAT rates are applied in forestry:
The reduced rate of 5.5%
Is applied to all forest work, expertise, unconverted timber sale…
The normal rate of 19.6% is applied to service provisions, certain supplies, road, tracks, infrastructures…
Article 298 bis GTC
Three situations can arise:
First situation
The total amount of collected receipts (timber and agricultural products) is less than 92 000 € over two years in a row: liability to VAT is not compulsory. The forester can profit from fixed repayment of VAT at a rate of 3.05% on the value of sold products (fixed repayment system, SIRET number compulsory)
SIRET = Company Identification.
Second situation
The total amount of collected receipts exceeds 92 000 € over two years in a row : the forester is necessarily liable to VAT
(Simplified Agricultural System = SAS)
Third situation
If there is much work and the receipts are low, the forester can voluntarily submit to VAT by choosing SAS. A choice over only three renewable years.
III- Taxes collected by the state for donation, inheritance and transfer
* Taxes collected for transfer
Taxes on transfer (registration fees, land registrar’s wages, notary’s fees) are degressive according to sales price between 10 and 6% of sales price.
* Taxes collected for donation and inheritance
Tax breaks
Article 793 GTC
To take into account the long period needed for forest production, a particular system, currently called “Monichon Amendment”, enables you to retain in the inheritance assets, only a quarter of the value of forests.
Under the twofold condition of keeping your property for 30 years and subscribing a commitment to
(SSM, RTM, FGPC)
IV- Other Financial Charges
* Mandatory Voluntary Contribution (MVC)
MVC is a subscription charge required from forest owners and farmers for the first step of transformation (veneering, sawing) in order to finance actions useful to the whole forest and timber network.
The owner’s charge amounts to 0.5% of the sum of the sale of standing trees, 0.33% of the sale of trees sold by roadside and 0.25% of the sale of trees delivered to factory.
This charge is to be paid at France Bois Forêt.
