You're looking for a forest to sell. As part of your project, it is essential to understand the tax rules that apply to woodland properties, whether in terms of income tax, inheritance tax, gift tax or property wealth tax.
This article will guide you through the special tax features of French woods and forests.
The PSG (Plan Simple de Gestion) is a document that sets out the terms and conditions of forest management over a very long period. It is compulsory for areas of 25ha or more to qualify for the main tax benefits, and is strongly recommended for areas of 10ha or more.
This document will plan and commit you to the management of your forest for a minimum period of 10 to 20 years.
If you have not signed this type of document, you will need to obtain authorisation from the DDTM (Direction Départementale des Territoires et de la Mer) to carry out any felling over an area of more than 1 hectare. The same obligation applies if you wish to carry out any felling not provided for in your document.
Once the area has been felled, you are also obliged to restore it to its wooded state.
In the same way, any land clearing operation requires prior authorisation.
Income from forests is more varied than you might think at first glance. You can earn income from :
Annual profitability is estimated at between 1 and 2%.
Forest owners must declare their ‘agricultural profits’ (known as the ‘Forfait Forestier’) each year. The taxable agricultural profit from wood felling is set at a sum equal to the income used as the basis for the property tax levied on these properties in the year of taxation.
It is not necessary to file a special income tax return. Owners simply need to state the cadastral income taxable on their wooded properties under the heading relating to the flat-rate agricultural profits scheme, specifying that the property is in fact woodland.
Income from the rental of hunting rights, on the other hand, comes under property income, with the possibility of benefiting from the micro-foncier system (flat-rate deduction of 30% on income) if the total amount of income is less than €15,000.
Property tax is levied on forests in the undeveloped property category. A flat-rate allowance of 20% is automatically applied to the cadastral income to calculate this tax.
Any change in cultivation must be declared to the tax authorities in order to determine the cadastral income of a plot.
Certain work qualifies for exemption from property tax:
|
Property concerned |
Type of exemption |
Duration of exemption |
Exemption rate |
Documents to be submitted to the authorities |
|
Land seeded, planted or replanted with trees |
Automatic |
10 years for poplar plantations 30 years for softwoods 50 years for hardwoods and other woods |
100 % |
Declaration n°6704-IL within 90 days |
|
Wooded land in the nature of high forest or coppice under high forest, other than poplar plantations, which has undergone natural regeneration. |
Automatic |
30 years for softwood 50 years for hardwoods and other woods |
100 % |
Declaration no. 6707 and certificate issued by the Office national des forêts before 1 January |
|
Woodland with an irregular high forest in regeneration equilibrium |
Automatic |
15 years (renewable) |
25 % |
Declaration no. 6707 and certificate issued by the Office national des forêts before 1 January |
|
Natura 2000 site (Natura 2000 contract or charter) |
Automatic |
5 years (renewable) |
100 % |
Undertaking by the owner to submit before 1 January |
The Impôt sur la Fortune Immobilière (IFI) replaced the Impôt de Solidarité sur la Fortune (ISF) a few years ago. Forests, as real estate, fall within the scope of the IFI.
However, taxpayers who own a forest benefit from a 75% allowance on the value of the forest. The tax is therefore calculated on only 25% of the market value of the forest.
To qualify for this allowance, the forest owner must have a tax certificate guaranteeing sustainable management, which requires the implementation of a sustainable management plan (for 30 years) and the provision of a good management report every 10 years.
Note that the liabilities incurred in acquiring the property are only deductible to the same extent as the forest itself, i.e. 25%.
If the owner of the forest is considered to be a professional, he or she will benefit from a total exemption for professional assets.
Tax credits are granted to taxpayers in return for certain expenditure. This scheme provides a strong tax incentive to manage forestry property sustainably. These 2 schemes, known as DEFI for Dispositif d'Encouragement Fiscal à l'Investissement, are detailed in this table.
|
|
DEFI Travaux |
DEFI Assurance |
| Object |
Improvement work: planting, reconstitution, protection and improvement of stands work to create and improve forest services. |
Taking out an insurance policy covering woods and forests |
| Rates |
25% |
76% |
|
Spending limit |
|
15 € per ha |
|
Capping the tax advantage |
6,250 for a single person 12,500 for a couple |
6,250 for a single person 12,500 for a couple |
Lastly, a tax reduction of 50% of the contributions paid, up to a limit of €1,000 per tax household, is also available for contributions paid to associations for the defence of forests against fire (DFCI contributions).
Under the so-called ‘Monichon’ scheme, ¾ of the value of the forest is exempt from tax when it is transferred by gift or inheritance. This preferential regime applies to forests and shares in Groupement Forestier.
This exemption is subject to a number of conditions:
The beneficiary of the exemption must then provide evidence every 10 years that these commitments are being maintained.
If the property is resold before the 30-year period has elapsed, the deed of sale must stipulate that successive owners must provide information on the management.
Failure to comply with this obligation will result in the payment of unpaid duties at the time of the transfer, together with surcharges.
Acquiring a forest can therefore be a powerful tool for tax optimisation when planning a transfer.
However, the 30-year commitment to sustainable management should not be overlooked. If you sell the property before the 30 years are up, the commitment is taken over by the buyer or successive buyers. The tax exemption will then depend on these buyers maintaining the initial commitments. If you fail to honour the commitment, you will be liable for the tax you initially saved, plus 30%, 20% or 10% depending on whether the failure occurred before the 10th, 20th or 30th year.
Example:
You own a 50-hectare forest with an average value of €5,000 per hectare, giving you a total estate of €250,000.
When you pass on your assets to your children, after an allowance of €100,000 (per child and per parent), your children will have to pay inheritance tax according to a progressive scale:
|
Taxable amount after allowance (2024 scale) |
Applicable rate |
| Less than €8,072 | 5% |
| From €8,072 to €12,109 | 10% |
| From €12,109 to €15,932 | 15% |
| From €15,932 to €552,324 | 20% |
| From €552,324 to €902,838 | 30% |
| From €902,838 to €1,805,677 | 40% |
| More than €1,805,677 | 45% |
In the highest inheritance tax bracket, inheritance tax on an estate worth €250,000 could therefore amount to €112,500. The 75% allowance therefore reduces the amount of inheritance tax to €28,125, a saving of €84,375.
For an average tax bracket of 20%, the saving remains significant at €37,500.
Transferring shares in a Groupement Forestier benefits from the same tax advantages as direct ownership.
However, setting up a Groupement Forestier in advance makes it possible to:
This favourable tax regime is one of the main reasons why many wealthy families invest. But it should not obscure the main characteristics of a forestry investment: a very long-term investment, low profitability, low liquidity, etc. Not forgetting the risks associated with global warming.
In addition to the tax advantages that owners can enjoy when they buy a parcel of forest, the tax system for taxing income, the specific system for transfer duties or for tax on real estate wealth is very special and often of considerable asset value.
