Modeled on the model of investments in forests, wine land groups offer a tax advantage on purchase and during transfer. But difficulties on the second market and unstable dividends make it confidential compared to products paying in bottles.
It’s a paradox. On the internet, dozens of sites explain the tax advantages of Wine Land Groups (GFV), with a reduction in taxes on investment. But when we come across the pages marketing these products, this reduction has disappeared.
The reason is simple. Two vehicles… have the same name! However, they have opposing characteristics, from an economic and fiscal point of view… One offers a tax reduction, the other does not. And in this fight between GFV, the tax exemption has almost disappeared from circulation.
There are very few, assures Jean-Claude Chasson, founder of Bacchus Conseil, a major player in wine investment. This is happening less and less, confirms Nicolas Agresti, director of studies for the Safer federation, an organization specializing in the sale of rural land.
Benefits galore
Something to surprise, because it seems to have everything to please. start with its purpose: to offer the opportunity to invest in wine properties. Like forestry groups, it falls within the framework of the Madelin system (IR-PME), and allows 25% of its investment to be deducted from its taxes. It offers a small annual return, as well as a potential capital gain on the price of the shares. This GFV is finally an ideal product for making a donation or preparing for an inheritance. provided he has held his shares for two years, he is exempt from 75% of free transfer taxes (donations, inheritances, etc.) up to a limit of 300,000 euros.
Price explosion
One of the rare vehicles of its kind on the market is Foncire Champenoise France Valley II. It is supported by France Valley, leader in forestry investments. The company chose Champagne because this terroir is unique in the world, according to Ric Bengel, associate director of France Valley. The vineyards are very noble. Champagne is dominated by luxury players. The more bottles they sell around the world, the more they will need to secure their grape supply. Crisis or not, demand remains strong. However, this prestigious drink is often a blended wine, bringing together various grapes from the region. They are therefore ready to buy plots at any price.
This buying pressure is driving up the price per hectare: it is trading for nearly 1.3 million euros. This creates big difficulties, regrets ric Bengel. Among the 370 champagne houses, many are independent and family-owned. They do not have the cash to buy land at this price.
Harvest sharing
This is where the France Valley group intervenes. He buys the vines and puts them at the disposal of a winegrower. We are putting in place a 20-year sharecropping lease, explains the director of France Valley. Sharecropping is specific to the world of wine: instead of paying rent, the farmer gives the owner 1/3 of his harvest. This allows the winegrower to work peacefully. Because by paying according to grape production, the lease charge will adapt to the reality of sales. For partners, the return is therefore variable, but does not exceed 1% per year. This is taxed under the (advantageous) regime of agricultural profits. As with the forest, the bulk of the performance actually depends on the evolution of the price of the shares, which is constantly increasing. And there is still room: in Burgundy per hectare sells for up to 3 or 4 million euros!
No second market!
In the tax-free model, it is prohibited to remunerate savers in bottles. They have the possibility of purchasing champagne at a reduced price, from -5 to 45%, smiles Eric Bengel. It’s symbolic. Important: it is necessary to keep your shares so that the tax advantage is not called into question. For its part, the 75% advantage on transmission requires a two-year holding period. The investment imposes an entry fee, generally 10%, and a management fee. France Valley’s objective is, net of all costs, around 2.5%.
In short, it’s a nice project for a wine enthusiast. Except there is a major risk. These vehicles are fixed capital. To enter as well as to exit, it is negotiated by will. In the event of share redemption, the investor does not benefit from the tax advantage, warns Eric Bengel. Needless to say, it’s wasted effort! We will have to hope that the winegrower wishes to buy back the shares, or that the vehicle decides to dissolve it, and therefore the real distribution of the property between investors.
Tenancy rather than sharecropping?
Bacchus Conseil does not offer this product. We want liquidity in the investment, says its founder Jean-Claude Chasson. He is not convinced by the sharecropping model. The investor participates in the operating company. The result is therefore linked to climatic and market conditions. He lists the risks: poor management, frost, hail, diseases… In champagne, we have had catastrophic years, he warns. It is therefore clear: People are reluctant. This is why there are very few of them.
This is where the other GFV comes into play. We call them landowners, explains Nicolas Agresti of Safer. There are many in France, because they are more stable. Similar to real estate partnerships, they also aim to collectively buy all or part of the vineyard properties, and entrust the exploitation to a winegrower. The farmer is responsible for the maintenance of the vines and production, explains Jean-Claude Chasson. Instead of sharecropping, tenancy is preferred. The principle: a lease defines the amount owed by the operator, whatever the result. Changes in this amount, decided by prefectural decree, are rare. Everything is fixed once and for all, he summarizes.
Real estate companies are virtuous, because the partners do not expect exceptional returns
Market leader, Bacchus Conseil has established 87 GFVs to date. Financial performance is around 1%, imposes the flat tax. But you can choose remuneration in kind, therefore in bottles. In this case, the yield is more like 4.5 or 5%. Jean-Claude Chasson works with professionals wishing to develop, within the framework of family buyouts or the establishment of young farmers. For Safer, this type of investment is good for the wine business. Real estate companies are virtuous, because the partners do not expect exceptional returns, analyzes Nicolas Agresti. They are attached to the territory, with a concern for diversifying their heritage. Furthermore, he certifies that these GFVs do not cause prices to explode. To regulate things, Safer has a right of first refusal on any agricultural transfer. It is more the wine dynamic, the demand and the value of the bottles, which favor this increase.
Better dynamics
There is therefore no tax advantage between. On the other hand, like their false twin, these GFVs offer a 75% reduction in the event of transfer of shares held for at least two years. The big advantage is that the second market is more dynamic: the shares are almost always bought by other partners of the group, or clients of other GFVs. And since the value of the shares appreciates, we can even get a capital gain! Every three years, we ask Safer for a value opinion. The partners can then decide on a revaluation of the shares. For the moment, this is always the case: over the past 6 years, investments have gained 10 to 20%!
Currently, several projects are available: Champagne, Chteauneuf-du-Pape… with the exception of Burgundy, whose prices are excessive, all wine-growing regions are covered: Bordeaux, Languedoc, Champagne, Alsace… The shares are offered between 3000 euros for small estates, and up to 15000 for the most recognized… The fees are 12%, and the purchase is made directly or via wealth advisors.
Strong demand
To set up the GFVs, the firm closely examines the operator: family situation, balance sheets, tasting of samples… In general, the amount collected is between 500,000 and 2,000,000 euros. For promising appellations, the subscription is sometimes completed in a few hours! Our customer file is still waiting for new products, says Jean-Claude Chasson. Because it is a pleasure investment, focused on conviviality. He suggests that clients are sensitive to the opportunity to support farmers in their development. Many of them therefore attend the General Assemblies on site, to discover the vintages. To completely convince, Bacchus advises favors organic and biodynamic. Despite everything, this remains a very small market: the leader only collects 8 to 10 million euros per year!